The strategic-sectors policy unveiled in the Budget on Monday will support develop a significant pipeline of central public sector enterprises (CPSEs), which includes Bharat Heavy Electricals and Steel Authority of India, for privatisation, thereby boosting the Centre’s non-debt receipts meant to be devote on improvement programmes, division of investment and public asset management (DIPAM) secretary Tuhin Kanta Pandey told FE.
He stated the disinvestment receipts target of Rs 1.75 lakh crore for the next fiscal would certainly be met, if not exceeded. The approach has currently commenced for significant-ticket sales, so attaining the target will not be tricky at all, he added. Privatisation of fuel retailer BPCL is anticipated to conclude early in the year though the mega IPO of insurer LIC will most likely hit the industry in Q3-Q4, Pandey stated.
Monday’s Budget admitted that only Rs 32,000 crore will be mopped up by means of disinvestment of CPSEs in the existing fiscal against a huge target of Rs 2.1 lakh crore.
“We are serious about this number (Rs 1.75 lakh crore). If we conclude all the deals (in the pipeline), we will end up realising more…there is no embargo for us,” Pandey stated.
Strategic disinvestment pipeline for this fiscal — BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML and Pawan Hans — are all anticipated to be completed in FY22. At least two, BPCL and Air India offers, could be anticipated in the initial quarter of next year itself, as expressions of interest (EoIs) have been received from prospective purchasers and economic bids are anticipated quickly. Additionally, privatisation of two public sector banks and one common insurance coverage corporation are to be taken up in FY22.
The Budget unveiled the strategic sector policy which entails that the government retain at least one PSU in the 4 broad sectors though the remaining ones can be privatised or merged or closed. These sectors are: atomic power, space and defence transport and telecommunications energy, petroleum, coal and other minerals banking, insurance coverage and economic services. In the non-strategic sector, all CPSEs will be privatised.
“There is a directional shift…Privatisation is now at the centre of the agenda of structural reforms,” Pandey stated. By announcing the privatisation of two banks and a common insurance coverage corporation, the government has kick-began selective denationalisation in the economic sector. “It is basically a reversal of processes which happened in 1960s and 70s, wherein several private banks were taken over,” he added.
As FE had reported earlier, the NITI Aayog had asked the government to retain handle more than the country’s leading 4 state-run lenders — State Bank of India, Punjab National Bank, Bank of Baroda and Canara Bank, even as it advisable that 3 modest public-sector banks – Punjab & Sind Bank, Bank of Maharashtra and UCO Bank, be privatised on a priority basis
The government’s program to sell 52.98% stake in BPCL, which was worth about Rs 60,000 crore in November 2019, about the time the stake sale proposal was authorized by the Union Cabinet. At the existing industry rates, the stake is worth about Rs 45,150 crore only. However, the actual receipts will rely on valuation and consideration of a premium.
The IPO of LIC was the second-largest element of the budgeted disinvestment target for this fiscal. While the valuation of the insurer – which typically plays White Knight to the government – will be recognized closer to the listing, it is believed to be worth Rs 8-11.5 lakh crore, which means a 10% IPO could fetch the government Rs 80,000-1,10,000 crore. Pandey stated the LIC IPO could hit the industry in the third or fourth quarter of this year as preparation of embedded worth and restatement of accounts of LIC could take about six months.