Cabinet panel to soon take up proposal to pare majority govt stake in PSUs

As the Narendra Modi government races against time to meet its highest ever divestment target of Rs 1.05 trillion, the Cabinet Committee on Economic Affairs (CCEA) is likely to take up for consideration two major proposals very soon. 

One will be ‘strategic sales’ of five state-owned companies and the other will be the proposal for the Centre to reduce stake in some companies to below 51 per cent and still maintain a majority stake.

The five companies are Bharat Petroleum Corporation (BPCL), Container Corporation of India (Concor), Shipping Corp of India (SCI), THDC India, and North Eastern Electric Power Corporation.

The other proposal, that of the Centre reducing stake in a number of state-owned companies to below 51 per cent, is different from privatisation, as the government will continue to hold a majority stake in these companies and they will still be classified as public sector enterprises.

These companies are those in which the Centre already has a stake below 60 per cent and could include Indian Oil (current government stake 51.5 per cent), NTPC (54.50 per cent), Bharat Electronics (58.83 per cent), BEML (54.03 per cent), Engineers India (52 per cent), GAIL India (52.66 per cent), and National Aluminum Co (52 per cent). The stake in these companies will be pared through offers for sale (OFS) on the exchanges.

ON THE AGENDA

• Privatisation plans of five PSUs — BPCL, Concor, Shipping Corp, Neepco, and THDC — up for consideration by CCEA
• TDHC, NEEPCO earmarked for PSU-to-PSU sale
• Proposal to reduce stake in some PSUs to below 51% may be taken up
• These will remain under public control with govt as the largest shareholder
• PSUs with govt stake of 60% or less being considered

“The government is considering, in case where the undertaking is still to be retained in government control, to go below 51 per cent to an appropriate level on case-to-case basis. The government has decided to modify present policy of retaining 51 per cent stake to retaining 51 per cent stake inclusive of the stake of government-controlled institutions,” Finance Minister Nirmala Sitharaman had said in 2019-20 Budget speech on July 5.

The key to the department of investment and public asset management (Dipam) meeting the target is strategic sales. The sale of 53.29 per cent government stake in BPCL itself is expected to add Rs 60,037 crore to government kitty based on current market cap. 

BPCL will be a key to achieving the divestment target, of which only Rs 17,364 crore is met so far. The other two listed entities — Concor and SCI— are expected to fetch around Rs 20,817 crore, if the government decides to sell its entire stake in both these companies. Interestingly, global majors in petroleum and freight segment are likely to be in race for BPCL and Concor.

Companies such as Saudi Aramco, Reliance Industries, Total, and Exxon Mobil are expected to be keen on BPCL. On the other hand, for Concor, DP World, Adani Group, PSA International, and AP Moller-Maersk Group are likely to be in the fray.  

As for NEEPCO and THDC, these two are earmarked for PSU-to-PSU sale. 

Business Standard had reported that they might be acquired by power major NTPC. While the Centre is still in the process of appointing transaction and legal advisors and asset valuers for the two, internal calculations show that both could fetch the exchequer around Rs 8,000 crore.