Centre looks to build divestment capacity in govt departments, PSUs

DIPAM calls for in-house capabilities for analysis and decisions regarding divestment-related measures

The Centre is looking to build institutional capacity for privatisation among various government departments and public sector undertakings (PSUs) to give a fillip to the New Public Enterprises (PSE) policy, 2021.

The Department of Investment and Public Asset Management (DIPAM) is prodding ministries to develop in-house capabilities for conducting analysis and decision-making for divestment-related measures, said an official.

This comes even as fears over undertaking privatisation proposals remain, especially due to litigation, within government departments and PSUs as many such decisions have been challenged in courts by employees, activists, among others.

Recently, the privatisation of Central Electronics and Pawan Hans was put on hold due to adverse court rulings against winning bidders. As the Centre looks to move ahead with privatisation, ending this fear over strategic sales among departments is needed, and DIPAM plans to nudge them to focus on the “objective rather than merely looking at the output which isn’t always in their hands,” the official said.

The DIPAM may reach out to various government departments and ministries to proactively consider privatisation proposals of their PSUs in line with the government’s PSE policy that aims to minimise government’s presence in strategic sectors and exit non-strategic ones. The DIPAM has also prepared a dossier to help departments and PSUs understand the processes involved in the strategic divestment of state-owned firms and their units. It includes the processes and guidelines that will have to be followed at every step.

PRIVATISATION PUSH

• Looking to build institutional capacity among government departments
• Building capacity across departments to help in pushing privatisation, according to the PSE policy
• DIPAM’s capacity would be utilised for large privatisation proposals as against transactions where the Centre does not own any stake
• Concerted push to be given to normalise the culture of exiting bad investments by PSUs

To build institutional capacity, government departments and PSUs will have to appoint transaction advisors to assist them in strategic divestments. “Building such capacity at PSUs will give a significant push to the PSE policy, and all transactions will not be dependent on DIPAM,” the official said.

Last month, the Union Cabinet had empowered boards of public sector enterprises to suggest and undertake the process for strategic disinvestment, minority stake sale, stake in joint ventures (JV), and closure of any of their subsidiaries. PSUs have also been asked to execute strategic sale of their units where approval is received from the Cabinet.

This would help in utilising DIPAM’s capacity for large privatisation proposals as against transactions where the Centre does not own any stake. In the last financial year, DIPAM managed the sale Neelachal Ispat Nigam, where the Centre did not hold any stake, but the department was managing the sale by other PSUs. Even with limited capacity at DIPAM, such a measure would help in scaling up the privatisation drive across departments by deputing more officials to identify assets for divestment and undertake such analysis, the official said.

Besides setting up transaction advisor capacity, the government departments and PSUs will have to ensure valuation is not jacked up artificially, and conducted with the help of professionals and interested parties, said the official. Another key area which would need a push is normalising the culture of exiting bad investments by PSUs, the official added. “Exiting ventures need to be normalised among PSUs as it's a commercial decision. They must exit investments and invest in new projects in turn creating a culture for asset recycling,” he said.