Government Plans Aggressive Strategic Sale of 35 Selected CPSE

News Frontliner Web Desk, 13 May 2019: According to the report of news agency PTI, the finance ministry is modifying strategic sale procedure to ensure outright sale of Central Public Sector Enterprises (CPSE) within 4 months of issuance of documents to potential investors, a move aimed at ensuring speedier conclusion of the entire sale process.

However, for relatively larger CPSEs like Air India, the timeline for completion of strategic sale is likely to be fixed at 6 months from the date of issuance of Preliminary Information Memorandum (PIM) about the company.

Currently, there is no fixed timeframe for concluding strategic sale of a state-owned company and the entire process, in some cases, drags on for months and years.

“The thinking is to streamline the entire process and if the process cannot be completed in 4 months then it should be abandoned. The procedure would be drafted in a way such that the strategic sale process of multiple CPSE’s can go on simultaneously,” an official told PTI.

In last fiscal, the government raised ₹ 84,972 crore from disinvestment, of which ₹15,914 crore came in from strategic stake sale.

The government’s strategic sale initiative has not taken off well as quite a number of cases that were offered for strategic sale under the plan failed to attract investors. The latest being Pawan Hans, where the government offered to sell its entire 51 per cent stake to strategic investors, but the bidding process failed to attract any investors.

Last year Air India’s disinvestment bid had also failed for want of bidders. Similarly, previous attempts to sell other loss making entities such as Scooters India, the manufacturer of the popular brand of three wheeler, Vikram also failed in the absence of any bidders.

Strategic sale of the Durgapur-based Alloy Steels Plant and Salem-based Salem Steel Plant, the two SAIL (Steel Authority of India Limited) units also was unsuccessful because of workers’ agitation that made investors and bidders disinterested.

Bharat Pumps & Compressors Ltd, Hindustan Fluorocarbons Ltd in April 2018 were offered for sale in April 2018, but these two companies also avoided strategic sale in the absence of any prospective bidders.

The finance ministry is reworking strategic sale procedure to ensure outright sale of CPSEs within 4 months of issuance of documents to potential investors, a move aimed at ensuring speedier conclusion of the entire process, an official said.

Facing a daunting task of meeting the ₹90,000-crore disinvestment target in the current fiscal, the Department of Investment and Public Asset Management (DIPAM) will focus on outright sale of identified 35 profitable and loss-making CPSEs which have already been selected by the NITI Aayog for strategic sale; some of which had already been on strategic sale offer.

Government’s Newest Plan

In a situation where the government’s strategic sale effort is not getting off as expected due to lackadaisical response from the private bidders, government has came up with a contingency plan. Cash-rich central public sector enterprises (CPSEs) will come to the rescue of government strategic sale programme to take over controlling interest in some of these sick and loss making companies.

The Department of Investment and Public Asset Management (DIPAM) officials said that during the next round of sale of majority government holding in companies will be offered to willing CPSEs proposing to give a good valuation for Centre’s stake. The officials believe, this would eliminate the need to go through a complex sell-off process with no result coming at the end.

DIPAM, enthused by the recent Rs 4,800 deal struck between GAIL and an IL&FS subsidiary to take over latter’s 874 MW of operational wind projects believes, that if similar process is adopted for a few other CPSEs, the sell off process would not only be smooth but government could also get better valuation for its shares.

Shortlisted companies For Strategic Sale

The companies which have been shortlisted for strategic sale include Air India, Air India subsidiary AIATSL, BEML, Scooters India, Bharat Pumps Compressors, and Bhadrawati, Salem and Durgapur units of steel major SAIL.

The other CPSEs for which approvals are already in place for outright sale include Hindustan Fluorocarbon, Hindustan Newsprint, HLL Life Care, Central Electronics, Bridge & Roof India, Nagarnar Steel plant of NMDC and units of Cement Corporation of India and ITDC.

Strategic Sale Scenario This Fiscal

During the fiscal, state-owned NBCC bought government stake in HSCC for ₹285 crore. Besides, a consortium of four ports acquired the government’s 73.44 per cent stake in Dredging Corp of India for ₹1,049 crore, while National Projects Construction Corporation (NPCC) was sold for ₹80 crore.

So far in current financial year, the government has mopped up ₹2,350 through disinvestment transactions.

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