Centre plans to give some strategic disinvestment powers to DPE

DPE may be entrusted with seeking approvals from cabinet for strategic disinvestment

The Union government is looking to entrust some powers in its strategic disinvestment process to the Department of Public Enterprises (DPE), which has now been brought under the Ministry of Finance.

The government may empower the department to seek approvals on candidates for privatisation from the Cabinet after NITI Aayog suggests names of public sector enterprises for strategic disinvestment. The plan is being considered as a measure to reduce delays in the strategic disinvestment that takes about 12-13 months from identification of public sector undertakings (PSUs) to execution of the transaction.

According to the proposal being discussed, the existing task of the Department of Investment and Public Asset Management (DIPAM) of taking the candidates for privatisation to the Core Group of Secretaries on Divestment (CGD) and subsequently to the Alternative Mechanism and the Cabinet may be entrusted with the DPE. This would help in sharing the responsibility of DIPAM. At the same time, it is aimed at quickening the current process, an official said.

Currently, the NITI Aayog identifies companies for divestment which are then considered by the cabinet secretary-led CGD. The CGD gives its suggestions to Alternative Mechanism (AM), which comprises the finance minister, the minister for administrative reforms, and the minister for roads, transport and highways, among others. Once approved by AM, DIPAM moves the proposal to obtain in-principle approval from the CCEA for strategic divestment of the PSU concerned.

Existing privatisation or strategic divestment involves around 12 steps, from identification of CPSEs for privatisation, approval of shareholding to be divested by the Cabinet Committee on Economic Affairs (CCEA), selection of intermediaries, floating preliminary information memorandum, approval of bids by the CCEA, and completion of the transaction by execution of the share purchase agreement, besides adhering to Sebi guidelines in case of listed companies.

Post the approval from the Cabinet on PSUs selected for privatisation, DIPAM would continue with the process of appointing intermediaries for managing the sale. It would also continue with the preparing the expression of interest and request for proposal, as well as preparing of share-purchase agreement, negotiating condition precedents of the sale, among others.

NITI Aayog had earlier pitched to overhaul the privatisation process, which may include directly seeking the CCEA’s approval after it submits the recommendations on candidates for this purpose.

The DPE is currently preparing new guidelines for the closure of PSUs. Existing guidelines on shutting down PSUs consumes about 13 months after CCEA gives it approval. This period includes steps, such as preparatory work needed for estimation of statutory and employee dues, liabilities towards secured creditors, disposal of movable assets, and utilisation of PSU land for building public infrastructure. These guidelines will be rationalised to shorten the time period for closure of state-owned enterprises.

The track record of the government on strategic sale has been dismal. It budgeted Rs 28,500 crore to come from this head during 2015-16, but could not go for even a single strategic disinvestment. The next year, it realised the receipt of Rs 12,273 crore from strategic disinvestment against the Budget Estimates of Rs 20,500 crore. This category of disinvestment could not be carried out again in 2017-18 whereas the Budget had projected Rs 15,000 to come from this head. After that, the government did not specifically mention projected realisation from strategic disinvestment in the Budgets.