Category: PSU reforms & dis-investment

There is a need for a paradigm shift in the approach to disinvestment; the Government must detach it from budgetary constraints and tackle legacy issues In a briefing following the presentation of the interim Budget for the financial year (FY) 2024-25 by the Finance Minister, Nirmala Sitharaman on February 1, 2024, Finance Secretary TV Somanathan stated that the “government no longer views disinvestment – fancy nomenclature for sale of Union government shareholding in central public sector undertakings (CPSUs) – from the perspective of balancing the budget”. The statement is out of sync with Sitharaman setting a target of Rs 50,000 crore as proceeds from disinvestment for the FY 2024-25 though it wasn’t mentioned in her speech. If, the government’s intent...

The lengthy and cumbersome process of approval and bureaucratic red tape undermines the chances of the Government selling CPSU shares to willing investors In the Budget for 2023-24, Finance Minister Nirmala Sitharaman had set a target of Rs 51,000 crore for proceeds of the sale of Union government shareholding in central public sector undertakings (CPSUs). As per available indications, the government may fall short of this target by Rs 30,000 crore. An overwhelming share of the shortfall is due to delays in the disinvestment plans of IDBI Bank (the government plans to sell 30.48 per cent of its stake as well as 30.24 per cent shareholding of LIC aggregating to a total stake sale of 60.72 per cent) and state-owned...

Despite Govt’s announcement to privatise the CPSUs, the fertilizer units remain under its control as fertiliser availability is a politically sensitive issue In the Budget for 2021-22, Finance Minister Nirmala Sitharaman had announced the government’s approach to privatisation of Central public sector undertakings (CPSUs). Privatization occurs when it sells its majority shareholding (more than 50 percent) in the CPSU and transfers control to a private entity. For this purpose, it divided CPSUs in two broad categories—i.e. strategic and non-strategic. The strategy covers four subgroups: atomic energy, space and defense; transport and telecommunications; power, petroleum, coal and other minerals; and banking, insurance and financial services. The non-strategic category includes all other sectors such as industrial and consumer goods, hotel and tourist...

The Union Government must set up a holding company where all of its shares in the Central Public Sector Undertakings (CPSUs) are placed In Budget for 2022-23, Finance Minister Nirmala Sitharaman had set a target of Rs 65,000 crore for proceeds of sale of Union government shareholding in central public sector undertakings (CPSUs). Against this, the revised estimate (RE) is placed at just about Rs 31,000 crore which works out to 47 per cent of the target. For 2023-24, Sitharaman has set a target of Rs 51,000 crore. During the last eight years since 2015-16 when this government started disinvestment with particular focus on ‘strategic’ sale (a sophisticated nomenclature for share sale that reduces its holding in the CPSU to...

The strategic sale of BPCL couldn’t be carried out because the Government wants to regulate fuel prices After over three years of having initiated the sale of its entire 53.29 per cent shareholding in Bharat Petroleum Corporation Limited (BPCL)—a Central public sector undertaking (PSU) in the sector of refining and marketing of petroleum products—the Government has decided to put it on hold. What could be the reason behind this move? Adopted a big-bang approach to privatisation (when government sells its majority stake in a PSU and transfers control to a private entity) in the Budget for 2021-22, Finance Minister Nirmala Sitharaman had divided Central PSUs in two broad categories—i.e. strategic and non-strategic. The former is subsumed under four subgroups: atomic...

The Government should also unshackle the process of strategic disinvestment from bureaucratic red-tape The ministry of finance has barred public sector undertakings from bidding for other Central Public Sector Undertakings which are on the block for privatisation. The Department of Investment and Public Asset Management has stated: “As a general policy, PSUs (Central/ State/ Joint)/State Governments and Cooperative Societies controlled by the Governments are not permitted to participate in the strategic disinvestment of other PSUs as bidders unless otherwise specifically approved by the Central Government in public interest”. PSUs are undertakings in which the Centre/State Governments or jointly with central and/or State Governments have majority ownership (with shareholding of 51 percent or more) and control. If, the Government decides to...

The lengthy and cumbersome process of approval and bureaucratic red tape undermines the disinvestment process With the financial year ending in two months, the Government is no close to meeting the target of Rs 175,000 crore from disinvestment of Central Public Sector Undertakings set in the Union Budget for 2011-2022. It has so far realized less than Rs 10,000 crore. Even after adding around Rs 100,000 crore, being the expected proceeds from sale of its 10 percent shares in Life Insurance Corporation of India, (on the premise that it goes through before the year-end), there will be a whopping shortfall of Rs 65,000 crore. This is not new. It is a continuation of a trend seen during the previous six...