Privatising small PSUs first not a good idea: NITI Aayog's Amitabh Kant

What is required is for unions to be convinced that the steps being taken are in their and the country's best interests, says Kant

Privatising small public sector undertakings first, just to prevent opposition from trade unions, would not help much. Rather, unions should be convinced that the steps on privatisation are in the country’s and their interests, NITI Aayog Chief Executive Officer Amitabh Kant tells Nikunj Ohri. The Aayog is anchoring the asset monetisation plan and is tasked with identifying candidates for privatisation. The government has held discussion on asset monetisation with large institutional investors on transaction structures and asset classes. It will explore the possibility of further road shows once the National Monetisation Pipeline is launched, Kant says. Edited excerpts:
 
Is the government targeting privatising small public sector undertakings (PSUs) first in order to prevent opposition from unions?

 
Unions are smart enough to know that if small PSUs are disinvested, the big ones would follow with higher probability, and thus this strategy would not achieve the desired outcome. What is required is for unions to be convinced that the steps being taken are in their and the country’s best interests, and that workers are being treated fairly and justly.
 

Will the government look to absorb the workforce of those banks or PSUs that would be privatised?
 
Not all public sector banks have excessive staff. The reasons for privatisation are related to other issues, including speeding up strategic decision making in a fast-changing market place. Similarly, for many PSUs, especially those in consulting, the most valuable assets are the employees and the enterprises would not be worth much to a promoter without the majority of its workforce intact. This is likely to result in better incentives for personnel retention.

 
The NITI Aayog has pushed for privatisation for some time and now has been tasked with identifying PSUs in the strategic sector for selloff. With what strategy has been the first list of PSUs collated?
 
Until the names are approved by the Cabinet Committee on Economic Affairs (CCEA), hinting at the choice and timing/sequence of divesting publicly listed companies could violate securities regulations and adversely impact outcomes. There is a vetting process and strong analytical framework that balances a multitude of considered factors -- from a positive impact on the economy to market liquidity and appetite.
 
How many banks have been listed for privatisation, and can you share the names? Will the government first target smaller banks? What strategy will be followed?

 
The finance minister has indicated that two public sector banks will be privatised. As all public sector banks are listed, it would be inappropriate to hint at the strategy and sequence until the Cabinet approves the names.
 
Will the government consider special incentives or attractive voluntary retirement schemes to enable smooth privatisation?
 
Smooth privatisation is a priority for the government. A balance between all stakeholders is considered by corporate boards and the ones of public sector firms are known for giving priority to workers among all stakeholders. New boards will be focused on minimal disruption to their enterprises and are likely to better incentivise those that stay and those that cannot be absorbed. The private sector has greater flexibility in compensation than the public sector and performance will be richly rewarded.

 
Prime Minister Narendra Modi has said the government will monetise assets worth Rs 2.5 trillion across sectors; what is the target for FY22, and what strategy will be followed to push PSUs and government departments to monetise assets?
 
A lot of groundwork in creating an initial pipeline of assets for monetisation has been done. To date, we have identified about 100 assets of central ministries and PSUs falling in around 30 asset classes with an aggregate investment opportunity of about Rs 2.5 trillion. Some of the transactions hit the market in the current year. The existing pipeline is expected to be rolled out over 2021-22 and 2022-23. The National Monetisation Pipeline is under preparation for the four-year period from FY22 to FY25.

 
How would the government plan to work with the private sector so that these assets can be timely monetised? What's the thinking to make these assets attractive for the private sector?
 
Engaging with the private sector and investors is a continuous process. The government has already done a number of such focused interactions with global investors. A few rounds of global investors’ roundtables have happened. Transaction and asset specific concerns from the investors are being addressed based on deliberations and consultations with ministries. Wherever needed issues are being taken up at Core Group of Secretaries on Asset Monetization (CGAM) level. We have undertaken focused discussions with large institutional investors to seek views and feedback on transaction structures and asset classes. We will explore the possibility of further roadshows once the National Monetization Pipeline is launched.