Buoyed by the success of disinvestment [sale of government shares in public sector undertaking (PSU)] undertaken during 2017-18 and 2018-19 [when the centre garnered over Rs 100,000 crore and Rs 85,000 crore respectively], for the current year, Modi – government had set an ambitious target of getting Rs 105,000 crore. A major slice of these proceeds was to come from ‘strategic disinvestment’ – or transfer of a sizeable portion of ownership [this could go up to 51% implying privatization] and management control to a private entity. The crucial ‘strategic disinvestment’ proposals included divestment of all of government’s shareholding in Bharat Petroleum Corporation Limited [BPCL] 53.29% ; Containers Corporation of India [ConCor] 30%; Shipping Corporation of India [SCI] 63.75%; North Eastern...
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Category: PSU reforms & dis-investment
IBC framework – springboard to 5 trillion dollar economy
In the midst of raging controversy over the Citizenship Amendment Act [CAA] [2019] and fear over the impending National Register of Citizens [NRC] capturing headlines in the media, a positive news for the economy went unnoticed. This relates to improvement in the health of the banking system. According to the annual report on ‘trends and progress of banking in 2018-19’ released by the Reserve Bank of India [RBI], the gross non-performing assets [GNPA] – a euphemism for loans turning dud – expressed as percentage of total loans declined from a high of 11.2% during the financial year [FY] 2017-18 to 9.1% during FY 2018-19. During the current year, this has remained stable at 9.1 per cent as of September-end, 2019. Correspondingly,...
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Bail out to all and sundry – road to disaster
The banks – mostly public sector banks [PSBs] – are relentlessly fighting a battle to deal with unsustainable levels of non-performing assets [NPAs] those were caused by ‘indiscriminate’ lending [with hardly any or no ‘due diligence’ which is a fundamental requirement for funding any project] mostly to corporate sector particularly during a decade under erstwhile UPA – dispensation [2004-2014]. While, NPAs have declined significantly from the peak level reached as on March 31, 2018 [courtesy, a massive dose of recapitalization by the union government of over Rs 300,000 crore during the last 5 years as also rigorous governance norms including putting some of them under prompt corrective action framework], the stress is far from over. This is in view of...
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Giving push to second generation reforms
A section of the commentators is always on the prowl looking for the slightest opportunity to lambast Modi – dispensation irrespective of the state of the economy. During the first four years of its first term i.e. 2014-15 to 2017-18 when GDP [gross domestic product] figures were promising, they blamed the government for fabricating data. But, when the numbers were not so promising as during 2018-19 and first half of current year, they target it for allegedly doing great damage to the economy, loss of jobs and income earning opportunities. Unfortunately, in this blame game that gets hyper-publicity in the media, some of the transformative reforms undertaken by this government – reforms that will have lasting effect for generations in...
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Govt must learn to let PSUs go
Privatisation and controls can’t go hand-in-hand. The Centre’s instinct to retain its hold on PSUs indirectly should give way to wholesome transfer of ownership and authority to private investors In the Budget presented on July 5, Union Finance Minister Nirmala Sitharaman announced disinvestment of the Government’s shareholding in public sector undertakings (PSUs) to a level below 51 per cent on a “case-by-case” basis. The Cabinet Committee on Economic Affairs (CCEA) is expected to approve this policy soon. The 51 per cent threshold is very crucial as shareholding at this level or above enables the Government to have majority ownership and control over the undertaking. If the holding is reduced to below 51 per cent, this will lead to relinquishment of majority ownership...
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PSUs – privatization and controls can’t go hand-in-hand
In her budget presented on July 5, 2019, the finance minister, Nirmala Sitharaman announced disinvestment of governments’ shareholding in public sector undertakings [PSUs] to a level below 51% on a ‘case-by-case’ basis. The cabinet committee on economic affairs [CCEA] is expected to approve this policy any time soon. The 51% threshold is very crucial as shareholding at this level or above enables the government to have majority ownership and control over the undertaking. If, the holding is reduced to below 51%, this will lead to relinquishment of majority ownership and control, or privatization in plain words. This will be transformative – a bold reform indeed. But, hold your breath, there is a caveat appended to it. In the budget speech, Sitharaman...
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PSU privatization – will Modi crack the whip?
The ‘strategic disinvestment’ is an acronym used to denote transfer of a sizeable portion of ownership and management control of the state in a public sector undertaking [PSU] to an investor [call him ‘strategic’ investor] by selling commensurate shares. In a transformative sense, the government could reduce its holding to below 51% so as to lead to relinquishment of its majority ownership and control, or privatization in plain words. The governments, the world over, have used this as an instrument to vacate areas of economic activity where they believe the state ought not to be involved in the very first place or after having operated for a certain period, currently feel it is no longer necessary. It is also used...
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PSBs – capital erosion continues unabated
During her second interactive session with the media on the state of the Indian economy and measures to give a boost, finance minister, Nirmala Sitharaman announced a number of bold reforms in the banking sector with major focus on consolidation of 10 public sector banks [PSBs] into 4 big entities – an overarching objective being to make them globally competitive and act as a foundation for achieving US$ 5 trillion milestone. Sitharaman informed about a substantial reduction in their gross non-performing assets [GNPAs] from 11.6% of total loans as on March 31, 2018 to 10.3% on March 31, 2019 [courtesy, huge recovery of over Rs 300,000 crore made possible largely by concerted action under the Insolvency and Bankruptcy Code (IBC)...
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Disinvestment: half-truths and clever babudom so far
Union Finance Minister Nirmala Sitharaman has set an ambitious target of Rs 1.05 lakh crore as proceeds of disinvestment of government shares in public sector undertakings (PSUs). She has also proposed aggressive pursuit of ‘strategic’ disinvestment by reducing government’s shareholding in PSUs to below 51% on a case-by-case basis. The route to garnering one-third of this target, or Rs 35,000 crore, has been set. This includes proceeds from divestment of Air India, which could not go through last year, courtesy the government’s decision then to retain 24% shareholding with itself (besides other riders such as a three-year lock-in period on disposition of shares by the acquirer) which discouraged prospective bidders. Strategic disinvestment involves transfer of a sizeable portion of ownership and...
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Relinquishing control over PSUs, really!
In her maiden budget presented on July 5, 2019, the union finance minister, Nirmala Sitharaman has set an ambitious target of Rs 105,000 crore as proceeds of disinvestment of government shares in public sector undertakings [PSUs] [this is even higher than about Rs 100,000 crore it had garnered during 2017-18]. She has also hinted at aggressive pursuit of ‘strategic’ disinvestment and even consider reducing governments’ shareholding in PSUs to below 51% on a case-by-case basis. A target of realizing 1/3rd of the proceeds from this route has been set. Over Rs 35,000 crore, the government is contemplating to garner from the ‘strategic’ disinvestment includes proceeds from divestment of Air India which according to the secretary, department of investment and public asset management...
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