DIPAM likely to decide on commercial matters for PSU privatisation

The Centre is looking to empower the Department of Investment and Public Asset Management (DIPAM) to take all commercial decisions regarding the sale of a public sector undertaking (PSU), a move that will cut approval layers for privatisation. 

This would include finalising preliminary information memorandum (PIM), request for proposal (RFP), share purchase agreement (SPA), and terms and conditions related to employee retention.

The decision to entrust DIPAM with such powers would be considered by the Core Group of Secretaries on Divestment (CGD) headed by the cabinet secretary as soon as Monday. The plan is being considered after the Centre successfully completed the process to sell Air India to Tata Sons. However, the experience from the sale has led to the tinkering of the process as there were several approvals needed from the top bureaucratic panel. 

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• DIPAM may be able to finalise the request for proposal, share purchase agreement, and employee-related matters for PSU sale 
• Move aimed at cutting delays in privatisation-related approvals
• Decision to entrust DIPAM with such powers to be taken by CGD
• Experience from Air India sale has nudged the govt to tinker with the process
• A call is yet to be taken whether DIPAM can solely decide on pricing matters

Currently, all commercial matters relating to the privatisation of a PSU are discussed by an inter-ministerial group headed by DIPAM secretary and co-chaired by the secretary of the administrative ministry. Once the panel takes decisions regarding sale agreements and conditions or regarding employee retention and terms for voluntary retirement, the proposals are sent to the cabinet secretary-headed panel. 

“The current process leads to too much back-and-forth for seeking approvals creating unnecessary delays in the process,” said an official. If the process is shortened, DIPAM can take a call on all these aspects, the official said. He said this would help in reducing the timeline for future privatisation proposals as the government looks to exit from non-strategic sectors and shed its presence in PSUs that fall in strategic sectors. 

As the government looks to privatise more PSUs suggested by NITI Aayog through its New Public Sector Enterprises Policy for Atmanirbhar Bharat, cutting delays in approvals is key to implement the plan on a strict timeline.

The panel headed by the cabinet secretary is yet to decide whether DIPAM can be empowered to take decisions on pricing matters for PSU privatisation, the official said. Valuation and setting of reserve price can't be vested solely on DIPAM and may need the approval of CGD, the official said, adding that a call would soon be taken regarding the same. 

To shorten the privatisation process and noticing slow progress on fresh privatisation proposals, the NITI Aayog had previously pushed for directly seeking the Cabinet Committee on Economic Affairs’ approval after the think tank submits its recommendations on candidates for privatisation, reducing one step of approval from the CGD. However, a call is yet to be taken on the same, the official quoted above said.