Govt puts final touches to strategic stake-sale policy framework

Asset sales likely for unlisted sick public sector undertakings; Disinvestment Commission to be formed

The government is putting final touches to a policy framework to sell or revive loss-making state-owned companies across sectors. A note is being circulated for inter-ministerial feedback and is likely to come for cabinet approval by end-December.

The policy framework for strategic sale or revival of loss-making public sector undertakings (PSUs) includes the formation of a Disinvestment Commission, to be tasked with deciding whether a company can be revived with additional capital funding, whether its financial health could be improved by ceding part of the stake and control to private sector investors, or whether it needs to be divested forthwith.

In the case of non-listed distressed PSUs, the Commission might decide on asset sale of factories, office space, warehouses, land parcels and other facilities of the company in question, Business Standard has learnt.

Earlier this year, Heavy Industries Minister Anant Geete had laid in Parliament a list of 65 loss-making state-run companies, including Air India, Fertilizer Corporation of India, Hindustan Shipyard, HMT, Mahanagar Telephone Nigam, Bharat Coking Coal, ITI and Scooters India, among others.

"A draft note which lays down the process of selling distressed PSUs is being circulated. At the centre of such a process will be the Disinvestment Commission. Its aim will be to bypass the bureaucratic hurdles associated with such decisions and carry out strategic sales or revival in a time-bound manner," said a senior official.

The Commission will be headed by the cabinet secretary and will consist of the secretaries of departments of disinvestment, public enterprises and economic affairs, alongside the secretaries of line ministries whose PSUs are up for deliberation. It is understood the first assets to go under the block would be hotels belonging to India Tourism Development Corporation.

Apart from deciding whether a financially distressed PSU needs to be sold or not, the commission is also likely to decide on the method of selling. "In case of listed companies, selling part or full stake might be carried out. It gets tougher for unlisted companies, wherein they need to be valued before being sold," said a second official.

If the Commission decides an unlisted entity needs to be divested forthwith, monetising its various assets could be the preferable route, the person added. All the Disinvestment Commission's decisions might have to be cleared by the cabinet.

Business Standard had reported earlier the Centre was considering selling assets such as offices, manufacturing and warehousing facilities of unviable companies.

The officials quoted above said, as a run-up to the proposed commission, Cabinet Secretary Pradeep Kumar Sinha has been holding meetings with various ministries and departments to discuss distressed PSUs coming under their domain.

The latest such was earlier this month with officials from the fertiliser ministry, to discuss companies such as Fertilisers and Chemicals Travancore, Brahmaputra Valley Fertilizer Corporation, Fertilizer Corporation of India, Aravali Gypsum & Minerals India, Hindustan Fertilizer Corporation, and other such companies.

For 2015-16, the budgeted disinvestment target is Rs 69,500 crore, of which Rs 41,000 crore is expected from 5-15 per cent stake sales in profitable listed PSUs and Rs 28,500 crore from strategic stake sale of sick state-owned companies.

So far, the disinvestment department has raked in nearly Rs 13,000 crore from stake sales in Indian Oil, Dredging Corporation of India, Power Finance Corporation and Rural Electrification Corporation.

The Modi government is reviving strategic sales after the previous National Democratic Alliance government, led by Atal Behari Vajpayee, raised around Rs 6,000 crore by selling loss-making PSUs and exiting certain sectors and no strategic sales under the 10 years of the United Progressive Alliance government.

THE ROAD TO DISINVESTMENT

• Draft note on policy for strategic sale of distressed PSUs being circulated
• Cabinet likely to approve the note by December end
• Disinvestment Commission to decide whether to sell or revive sick PSUs
• Assets of unlisted loss-making PSUs might go under the hammer
• Assets to include factories, warehouses, hotels, office buildings and land parcels
• Cabinet secretary has been meeting various ministries regarding their companies
• FY16 disinvestment target Rs 69,500 cr - Rs 41,000 cr from stake sale in listed profitable PSUs and the remaining from strategic sales
• So far, only Rs 12,600 cr garnered from four stake sales through OFS route