In line with the policy to give more operational freedom to central public sector enterprises (CPSEs), the government is considering giving more autonomy to CPSEs to make investment decisions up to 60% or more of their net worth from up to 40% now without Cabinet approval in projects, downstream companies or joint ventures (JVs).
However, the changes will likely apply to CPSEs in strategic sectors such as power, petroleum, coal and other minerals. The move may further the country’s energy and critical mineral security with the CPSEs in these sectors likely to be encouraged to acquire assets overseas.
Currently, ‘Maharatna‘ CPSEs, which enjoy the highest leeway in terms of devolution of autonomy, can take investment decisions up to Rs 5,000 crore or 15% of net worth (NW) in one project up to a total of 30% of NW in all projects combined. They can acquire raw material assets abroad through M&A or investment in JV/ subsidiary up to Rs 5,000 crore (or 25% of NW) in one project up to a total of 40% of NW in all projects combined.
However, these autonomies may be decent in domestic investments but are insufficient when comes to global energy and mineral assets, giving the competition from China and other countries an advantage due to their faster decision process, sources said. The process to obtain Cabinet approval on such investment proposals can take months after due consultation among the concerned.
If the Government decides to give greater investment autonomy, strategic sector CPSEs such as Oil and Natural Gas Corporation (ONGC), NTPC, Coal India, Indian Oil and Bharat Petroleum Corporation (BPCL) could get a leg up to secure India’s interests in critical minerals globally.
The Budget for FY22 unveiled the strategic sector policy which entails that the government has a minimum presence in the four broad sectors while the remaining ones can be privatised, merged or closed. These sectors are atomic energy, space and defence; transport and telecommunications; power, petroleum, coal and other minerals; banking, insurance and financial services. In the non-strategic sector, all CPSEs will be privatised or closed in case privatisation is impossible.
Last year, the government empowered the boards of the CPSEs to privatise, disinvest or close their subsidiaries and sell stakes in joint ventures without Cabinet approval by just intimating to a ministerial panel their decision. The move was aimed at giving power to their boards to right-size the CPSEs and undertake these transactions on their own, leaving the Department of Investment and Public Asset Management to focus on strategic sales of CPSEs.