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The Union government has begun the process for strategic disinvestment in assets of public sector undertakings, including three units of Steel Authority of India (SAIL), one of National Minerals Development Corporation (NMDC) and Ferro Scrap Nigam Ltd (FSNL).
Besides listing of MSTC, an undertaking under the ministry of steel that conducts a variety of auctions, is on the cards. FSNL is a subsidiary of MSTC.
Officials said transaction advisers were being appointed for the sales, which were likely to materialise in 2017-18. For assets that did not operate as companies, the parent company would first spin them off as 100 per cent subsidiaries, said a person privy to the development who did not wish to be named.
Since the proceeds from sale of equity in subsidiaries will go to the parent public sector undertaking, the government is likely to seek buybacks in such cases. The PSU would be asked to buy back government shares for an amount equivalent to the value realised from disinvestment in the subsidiary, said the person quoted above.
Asked if private investors would be interested, at a time when private investment is low, an official said global investors, whether corporates or funds, could also come in through the strategic sale route. If the National Democratic Alliance government is able to pull off strategic sales, it will be reviving a policy that was mothballed by the previous United Progressive Alliance regime, which preferred public issues of PSUs.
SAIL’s assets in the list include its Salem stainless steel plant in Tamil Nadu, Visvesvaraya Iron and Steel at Bhadravathi in Karnataka and the Durgapur alloy steel plant in West Bengal. These units are making a combined loss of Rs 600 crore annually. The losses are expected to decline to Rs 450 crore in the current financial year.
In the case of NMDC, the Cabinet Committee on Economic Affairs (CCEA) had approved the divestment of the Nagarnar steel plant.
The CCEA in October 2016 had approved a plan to sell loss-making state-owned companies, subsidiaries and select manufacturing plants to strategic buyers. It said the sales would take place through a two-stage auction, involving technical and financial bids.
The government has set a revenue target of Rs 56,500 crore from disinvestment in 2016-17. Of this, Rs 20,500 crore was to come from strategic sales, a roadmap for which was prepared by the NITI Aayog, but no sale has taken place yet.
Steel Secretary Aruna Sharma earlier this month said the government would look for managements that could turn around the loss-making units.
“This announcement of strategic disinvestment means a minimum of 51 per cent. So it depends on efficiency and it is subject to many things. It is in the initial stages. There are still a lot of processes to undergo,” she said.
