New PSE policy to cut number of such firms, force all to co-exist with private firms

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Published: May 18, 2020 3:30:38 AM

Centre will soon come out with a new policy to privatise all central public enterprises (CPSEs) in non-strategic space and some in strategic sector in order to open all the industries to private players.

Currently, there is no clear definition of strategic sector. Currently, there is no clear definition of strategic sector.

Taking forward its intent to exit from businesses, the Centre will soon come out with a new policy to privatise all central public enterprises (CPSEs) in non-strategic space and some in strategic sector in order to open all the industries to private players.

“In strategic sectors, at least one enterprise will remain in the public sector but private sector will also be allowed,” finance minister Nirmala Sitharaman said on Sunday. To minimise wasteful administrative costs, number of enterprises in strategic sectors will ordinarily be only one to four; others will be privatized or merged or brought under holding companies, she said.

Currently, there is no clear definition of strategic sector. Air India, which used to be a strategic CPSE earlier, is now being privatized.

“List of strategic sectors requiring presence of PSEs in public interest will be notified,” Sitharaman said.
According to department of public enterprises document, strategic areas include arms & ammunition and the allied items of defence equipments, defence aircrafts and warships; atomic energy (except in the areas related to the operation of nuclear power and applications of radiation and radio-isotopes to agriculture, medicine and non-strategic industries); and railway transport.

Currently, there are close to two dozen companies under railways, including IRCTC, IRFC, ConCor, Ircon and RVNL. Besides, privatizing some of these companies, the railways also plans to offer private players to run 150 trains in 100 routes across the country. Similarly, there are over a dozen companies under ministry of defence, including HAL, Hindustan Shipyard, Mazagon Dock Shipbuilder, Bharat Electronics and Bharat Dynamics.

With the Centre allowing upto 74% FDI in defence production, some of these companies may also go to private players in due course.

Currently, the government is in the process of soliciting bids for two big CPSEs —oil retailer and refiner BPCL and Air India. The Centre has also made its intent clear to bring down its direct holding in companies such as Indian Oil to below 51% to mobilise non-tax revenues to funds plans and programmes as well exit from businesses gradually.

Disinvestment of government stakes in companies have become a major source of non-tax revenue in recent years with collections of Rs 1 lakh crore in FY18, Rs 85,000 crore in FY19 and Rs 50,300 crore in FY20. With market conditions not conducive, the Centre might nearly halve the disinvestment revenue target of Rs 2.1 lakh crore for FY21.

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