The much-anticipated policy on strategic sale of state-owned companies will be out soon and it won’t be limited to just loss-making enterprises, Disinvestment Secretary Neeraj Kumar Gupta said on Tuesday.
“May be later in the year, the government will come out with a policy prescription for strategic sale. We will be doing strategic sale,” Gupta told reporters during a press conference on NTPC’s five per cent stake sale on Tuesday. “Broadly, the strategic sale is that government is selling the equity of the company along with the controlling management. How much stake will be sold, it will vary from place to place and company to company,” he added.
When asked which companies are likely to be sold outright by the government,, Gupta said: “I will go by what the finance minister and PM have said on where government should be in the business, that is one issue.”
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“And the second issue is, in the last Budget speech it was very clear that we do strategic sale but we will not confine to loss making CPSEs. Whatever is the policy statement we will go by that. So that will unfold, I am sure, very soon and we will wait for that,” he added.
For the year ending March 31, 2016, the budgeted disinvestment target is Rs 69,500 crore, of which Rs 41,000 crore was 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. However, volatile market conditions have put paid to hopes of actual figures coming anywhere close to those numbers. The revised disinvestment estimates for the year are likely to be closer to Rs 30,000 crore, a second official said. With no specific policy detailing how to select a PSU for strategic stake sale, methodology for valuation and the process to be followed, the disinvestment department could not go ahead with selling any ‘sick’ PSU so far this fiscal.
The Narendra Modi government is expected to provide a major push to strategic stake sales of loss-making public-sector undertakings (PSUs) in the upcoming year. A policy note on the proposed mechanism for strategic stake sale, which is being circulated among various government departments, is likely to be made public soon.
The policy framework for strategic sale or revival of ‘sick PSUs’ includes the formation of a body similar to the erstwhile Disinvestment Commission, led by the cabinet secretary and be tasked with deciding whether a sick PSU can be revived by ceding part of the stake and control to private sector investors, or whether it needs to be divested forthwith.
As per the new strategic sale mechanism, which will need cabinet approval, the disinvestment commission-like body will aim to bypass bureaucratic hurdles associated with decisions regarding complete or part exit of the government from a company. It will also comprise of the secretaries of disinvestment, public enterprises, economic affairs secretary, and the secretary of the line ministry whose company is up for complete or part divestment. The body will be tasked with carrying out strategic sales in a time-bound manner
In the last budget session, 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.
Apart from deciding whether a financially distressed PSU needs to be sold or not, the panel of secretaries is also likely to decide on the method of selling. In case of listed companies, selling part or full stake might be carried out.
If the panel decides an unlisted entity needs to be divested forthwith, monetising its various assets could be the preferable route, In fact, as a run-up to the policy note, Cabinet Secretary Pradeep Kumar Sinha had held meetings with various ministries and departments to discuss distressed PSUs coming under their domain. These meetings were held in the last quarter.
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.