Government departments, such as Railways, Posts, Airports Authority of India, major port trusts, and those that undertake commercial operations with development mandate, will not come under the ambit of the new PSU privatisation policy announced in the Union Budget 2021-22.
Public sector enterprises acting as regulatory authorities, autonomous organisations, trusts, and development financing institutions will also be out the ambit, according to the details of the policy.
The policy divides public sector enterprises into strategic and non-strategic ones. The strategic sector includes atomic energy, space and defence, transport and telecommunications, power, petroleum, coal and other minerals, and banking, insurance and financial services.
In strategic sectors, a “bare minimum” presence of the existing public sector commercial enterprises at the holding company level will be retained under government control. The remaining will be considered for privatisation, or merger or 'subsidiarisation' with other public sector enterprises, or closure. Public sector enterprises in non-strategic sectors will be considered for privatisation wherever feasible, or else they will be considered for closure.
Public sector enterprises that have been created through the Acts of Parliament, such as Food Corporation of India, those maintaining critical data bearing national security, Security Printing and Minting Corporation of India, and not-for-profit companies created for various promotional activities will also be exceptions.
Public sector enterprises assisting farmers in getting access to seeds and other such help, those created for providing financial assistance to Scheduled Castes, Scheduled Tribes, minorities, and other backward classes will also not be part of the policy.
Bare minimum presence
The “bare minimum” presence of government-owned companies in strategic sectors will be counted at the holding company level, and not at the level of their subsidiaries and joint ventures.
If the number of PSUs in one strategic sector is decided to be limited to one, the existing subsidiaries or joint ventures of one company -- decided to be retained as a PSU — will not be considered as separate entities, a government official explained. All other companies in that particular sector will be privatised, merged or subsidiarised with other public sector enterprises, or closed.
The government had earlier decided to cap the number of PSUs in strategic sectors to four when the policy was first announced in the Aatmanirbhar Bharat package. The ceiling for the number of companies has now been removed, and the ceiling for each strategic sector would be decided on a case-to-case basis.
The NITI Aayog will make recommendations for PSUs to be retained in strategic sectors under government control, and those that should be considered for privatisation, merger, subsidiarisation, or closure. These recommendations will be considered by the Core Group of Secretaries on Divestment (CGD) headed by the cabinet secretary. The suggestions of CGD will be considered by the Alternative Mechanism, which comprises the finance minister, the minister for administrative reforms, and the minister for roads, transport and highways.
The Department of Investment and Public Asset Management (Dipam) can also seek in-principle approval from the Cabinet Committee on Economic Affairs (CCEA) for strategic divestment of PSUs on a case-to-case basis considering investor appetite and sectoral trends.