Passing the sell-by date

In one of his first public statements after he took charge of the portfolio again, the new-old minister of petroleum and natural gas, Hardeep Singh Puri, categorically stated that plans to sell oil marketing major Bharat Petroleum Corporation Ltd or BPCL are “completely off the table”. He explained that BPCL is a highly successful Maharatna, the term that refers to state-owned companies with a high degree of autonomy, so the government sees no need to sell its 52.98 per cent stake.

This is a notable shift in approach. Plans for BPCL’s strategic disinvestment were announced in 2021 as part of the government’s “Atmanirbhar Package”. In 2022, they were called off for lack of buyers. Now the company has apparently become too valuable to sell. Also, the minister added, the government was not in favour of divesting its stake in oil companies.

Each new government that takes power is urged by the pink papers to focus on disinvestment as the most sensible means of bridging the government’s ever-widening resource gap. This year was no different. But shifting policy goalposts has been the bane of the disinvestment programme for at least two decades. That explains why the government has met or exceeded its disinvestment targets just five times since 1991-92, despite all the institutional permutations and combinations of creating a separate ministry to an evocatively named department, DIPAM, under the finance ministry. In the past decade, the government overshot the target just twice, in 2017-18 and 2018-19, mainly by dint of getting one set of public sector companies (Power Finance Corporation and ONGC) to buy others (REC and HPCL, respectively)

Yet, just three years ago, there was an exponential rise in expectations of a shift in the sluggish trajectory of disinvestment. In Budget 2021-22, the old-new minister for finance and corporate affairs, Nirmala Sitharaman, set out an elaborate policy of strategic disinvestment that purported to offer a “clear roadmap” involving strategic and non-strategic sectors. Under this template, the government was to have a “bare minimum” presence in four sectors. This included stuff like atomic energy, coal, petroleum, transport and banking and insurance.

In fact, BPCL figured with a bunch of companies under what Ms Sitharaman labelled “non-strategic” sectors. These included Air India, Shipping Corporation of India (SCI), Container Corporation (Concor), IDBI Bank, BEML, Pawan Hans and Neelachal Ispat Nigam and listing of the behemoth Life Insurance Corporation of India (LIC).

Of these, only three objectives have been met. The Tata group obligingly acquired Air India and Neelachal Ispat in January and July 2022 and LIC was listed in May. Pawan Hans’ sale was scrapped after it was discovered that the successful bidder was entangled in legal cases. For IDBI Bank, the hurdles of regulatory approvals, security clearances and valuation differences have finally been cleared; now the government needs to decide between two foreign buyers and one Indian bidder.

SCI disinvestment was delayed because of the complications involved in hiving off its land and other non-core assets. Now that the Maharashtra government has approved a stamp duty waiver on the demerger of assets, SCI’s disinvestment is part of the “first 100 days” agenda that the current government had drawn up before the elections.

But if a profitable company such as BPCL, which has a monopoly of the oil marketing business along with IOC and HPCL, struggles to find a buyer, it is hard to see why investors will queue up for SCI. For one, its share in India’s export-import trade has steadily fallen. For another, even as SCI is being put on the block, the government is inexplicably planning to float a shipping company jointly owned by state-run oil, gas, steel and trading firms for importing cargo for their captive use. Since oil imports alone account for about a fifth of Indian imports, a buyer is unlikely to put money in a company that will potentially undercut a significant part of its business.

In fact, several companies languishing on the block reflect policy dissonances or a lack of coordination with parent ministries. For instance, BPCL certainly looks like a big jewel if you scan the profit & loss account. But prospective buyers are likely to hesitate once they know that petrol and diesel prices are opaque, being administered by the government despite many resolutions to free them these past two and a half decades. A stake sale of 30.8 per cent in Concor was approved by the cabinet in 2019. But the Railways has raised some concerns (unspecified) that has put this plan on the slow track.

If selling relatively decent performers is problematic, the prospects for divesting zombie giants such as BSNL and MTNL with over 63,000 employees on their rolls looks pretty hopeless. The government has been urging both companies to speed up monetising their land assets, but even that’s progressing at snail’s pace.  At the same time, the Tata group’s struggles to make Air India an airline of some standard is unlikely to encourage other buyers to deal with employees with what one executive called “a public sector mentality”. In fact, despite roadmaps and Dipams, that’s been the outlook of the government too. Since 2014, the government has incorporated 96 new public sector companies, only a handful of them to hold non-core assets of companies on the block.