Dipam keeps ball rolling for stake sale in Bharat Petroleum and others

The Department of Investment and Public Asset Management (Dipam) has invited transactions, legal advisors, and asset valuers for divesting stakes in five public-sector undertakings (PSUs) — Bharat Petroleum Corporation (BPCL), Container Corporation of India (Concor), Shipping Corporation (SCI), and power companies THDC India and North Eastern Electric Power Corporation (NEEPCO).

Even after six months of the current financial year, the government has been able to achieve only 12 per cent of its disinvestment target of Rs 1.05 trillion.

So far, only Rs 12,357.5 crore has been obtained through disinvestment. 

Hence, disinvestment in these five PSUs holds the key for the government achieving its divestment objective and the fiscal deficit target of 3.3 per cent of GDP in 2019-20.

This would be critical after the recent sops of Rs 1.45 trillion by the government in the form cuts in corporation tax rates. 

The names of the companies were not mentioned in the request for proposal that Dipam invited. The deadline for merchant bankers and legal advisors to submit their interest is November 4. 

On September 30, a group of secretaries cleared a proposal to sell stake in these five PSUs. The level of stake sale is 53.29 per cent in BPCL, 30 per cent in Concor, 100 per cent in NEEPCO, 75 per cent in THDC, and 63.75 per cent stake in Shipping Corporation.

Among this, the privatisation of BPCL holds the key to achieving the divestment target. At current market values, selling 53.29 per cent in BPCL can mop up around Rs 56,400 crore. 

Through selling 30 per cent in Concor, the government will lose management control in the Indian Railways subsidiary. Earlier, the Cabinet had cleared stake sales in power companies THDC India and NEEPCO to power major NTPC. 

The Centre owns 75 per cent in THDC, which is a joint venture between it and the Uttar Pradesh government. 

During 2018-19, the government realised Rs 84,972.16 crore as disinvestment proceeds against the Budget estimate of Rs 80,000 crore.

A major reason for this was Power Finance Corporation acquiring 52.63 per cent of the government stake in REC for Rs 14,500 crore. 

This came to around 17 per cent of the year’s divestment proceeds. 

Similarly, ONGC’s acquisition of the HPCL stake was the key to the government achieving Rs 1 trillion divestment proceeds in 2017-18.

In a move to expedite privatisation in PSUs, the Cabinet has appointed Dipam the nodal department for their strategic sale. This was seen as a move to speed up the process and shrink the role played by the administrative ministries, to which the PSUs report. 

Based on the new procedure, Dipam and the NITI Aayog will jointly identify PSUs for strategic disinvestment.