DoD gets a fancy name but wings clipped

Dipam made secretariat of NITI Aayog for strategic sale

The government has limited the role of the department of disinvestment (DoD) by taking away from it the job of strategic disinvestment of public sector undertakings (PSUs).

A host of guidelines issued on Monday reduced the role of DoD, now called the department of investment and public asset management (Dipam), in strategic sales to that of secretariat for the core group of secretaries on disinvestment (CGD). The core group would be headed by the Cabinet Secretary. Members would be secretaries from the departments of economic affairs, revenue, expenditure, disinvestment, public enterprises, corporate affairs, legal affairs and the administrative ministry of the PSUs.

Even the recommendations to the CGD on strategic disinvestment would be made by the NITI Aayog. PSUs would be identified and the mode of disinvestment and method of evaluation would also be decided by it. The NITI Aayog did not have any major role in disinvestment so far.

The government has budgeted for Rs 20,500 crore from strategic disinvestment during 2016-17. Even for the current year, it had estimated Rs 28,500 crore to come from strategic sales but the plan came a cropper.

Recommendations to the Cabinet Committee on Economic Affairs including terms, conditions of sale, price and the strategic partner would be put by CGD.

The guidelines for strategic disinvestment were issued on Monday itself when Finance Minister Arun Jaitley presented the Union Budget for 2016-17. Besides the expected amount from strategic sales, Jaitley has also budgeted Rs 36,000 crore from partial stake sale in PSUs.

The government income from disinvestment of its equity in PSUs would be utilised for recapitalisation of public sector banks and investment in the Indian Railways. Proceeds from disinvestment of government equity in selected central public sector enterprises (CPSEs) is channelised into the National Investment Fund (NIF). CPSEs are those companies in which the direct holding of the central government or other CPSEs is 51 per cent or more.

"The funds so credited to NIF will be withdrawn and used for recapitalisation of public sector banks and investment in Indian Railways towards capital expenditure in 2016-17," said the Budget document.

The strategic sales could range from the government selling assets of a PSU to private investors to selling a loss-making PSU. "A new policy for management of government investment in CPSEs, including disinvestment and strategic sale, has been approved. We have to leverage the assets of CPSEs for generation of resources for investment in new projects," Jaitley said in his speech on Monday.

PSUs would be encouraged to offload land, manufacturing units, etc. for making investment in new projects. Though it is not very clear whether profit-making PSUs would be keen to divest assets, in case of loss-making PSUs, the sale of assets could fetch more than the company itself.