Govt clears massive PSU sales, other reforms; BPCL among five to be sold

By: |
Published: November 21, 2019 2:18:22 AM

Though no time frame has been announced for concluding these strategic sales, many, including the BPCL’s is expected in the current financial year itself, potentially increasing the Centre’s disinvestment receipts to even higher than the budgeted Rs 1.05 lakh crore.

Sales of the other four firms could fetch over Rs 30,000 crore at current prices. (Representational image)Sales of the other four firms could fetch over Rs 30,000 crore at current prices. (Representational image)

The Cabinet Committee on Economic Affairs (CCEA) on Wednesday approved the strategic disinvestment of five public sector undertakings (PSUs), including oil-refiner-marketer Bharat Petroleum Corporation (BPCL), and a proposal to bring down the government’s paid-up equity capital in central public sector enterprises (CPSEs) to below 51% on a case-by-case basis, while retaining the option to retain management control in them.

The BPCL asset to be sold to a strategic buyer — possibly a private firm — will include the entire government stake of 53.3% in it, but exclude the firm’s 61% stake in Numaligarh Refinery (FY19 net worth Rs 5,551 crore) which will remain in the public sector.

While Shipping Corporation (government stake 63.75%) and Concor (30.8% to be divested out of 54.8%) have also been approved for strategic sale, the sale of government stakes in two other PSUs — NEEPCO (100%) and THDC (74.2%) — will be exclusively to state-run power producer NTPC.

Though no time frame has been announced for concluding these strategic sales, many, including the BPCL’s is expected in the current financial year itself, potentially increasing the Centre’s disinvestment receipts to even higher than the budgeted Rs 1.05 lakh crore.

Sale of the government’s stake in BPCL (excluding Numaligarh) could alone fetch about Rs 60,000 crore at current market prices, or 60% of the disinvestment revenue target for this fiscal. Sales of the other four firms could fetch over Rs 30,000 crore at current prices.

According to sources, the move to reduce govt stakes in select CPSEs to 51% would enable launch of a series of bigger exchange traded funds (ETF) over the next few months. The reduction of government stakes in these firms won’t impact their current obligations as state-run entities, like jobs reservation, RTI-related ones, etc.

The Cabinet also allowed National Highways Authority of India (NHAI) to securitise toll receipts for raising funds and gave it unfettered authority to make suitable changes wherever and wherever required in its asset monetisation programme through the toll-operate-transfer (ToT).

The securitisation of toll receipts will help the NHAI to raise funds from stretches where the traffic is already high and needs capacity augmentation in next few years. Infrastructure assets such as roads are suited the best for securitisation as they ensure stable cash flows backed by long-tenure concession agreements and higher recovery rates.

The cabinet has also relaxed norms to the NHAI’s asset monetisation programme through the ToT route. Earlier operational projects collecting tolls for at least two years were allowed to be given on 30 years of lease against upfront payment. Now, a highway project collecting tolls for one year could be put up for auction.
The cabinet has also provided the NHAI board the flexibility to fix the lease tenure to anywhere between 15 years and 30 years. Earlier, it was fixed for 30 years.

Through two such funds – Bharat 22 and CPSE ETF – the government raised Rs 45,080 crore in the last fiscal, more than half of the disinvestment proceeds in the year. Two ETF issues this year yielded Rs 14,369 crore to the government. Besides the two extant ETFs, the Centre might launch new sectoral ETFs also in the current year.

In her budget speech, Finance Minister Nirmala Sitharaman had said: “The Centre is considering, in case where the PSU is still to be retained under government control, to go below 51% to an appropriate level on a case-to-case basis”.

Currently, there is limited headroom to mobilise disinvestment revenue through Bharat 22 ETF, because the government stakes are in the 52-53% range in many large PSUs which the institutional and retail investors might find attractive. The threshold of minimum government holding for PSUs to be in ETF baskets is 52%.
Bharat 22 ETF is a diversified index of 22 stocks, including IOC, Nalco, GAIL and Engineers India. .

As for the last few issues, the ETF managers procured stocks of firms like Indian Oil and ITC to retain their weights in the indices.

Analysts are of the view that India’s ETF market is expected to witness robust growth in the coming years due to a structural shift in asset-class preference from fixed income to equities as interest rates moderate.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1Realme 5s is the latest Redmi Note 8 rival with 48-megapixel quad cameras
2Sennheiser logs 200-300 per cent growth in wireless headphones sales in India
3Predatory pricing by e-commerce companies: Government’s knee-jerk reaction may aggravate MSMEs’ concern