BackGovt to consider Niti Aayog’s proposal for strategic stake sale in PSUs tomorrow
Niti Aayog has prepared a list of public sector units where the government can sell its majority stake to private companies in order to bring in greater efficiency
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New Delhi: The Union Cabinet is likely to consider the proposal of NITI Aayog for strategic stake sale in over a dozen public sector undertakings (PSUs), including profit making ones. The Cabinet will on Thursday consider the National Institution for Transforming India (Niti) Aayog proposal of strategic sale of PSUs.
Niti Aayog has prepared a list of public sector units where the government can sell its majority stake to private companies in order to bring in greater efficiency and professionalism in functioning. Based on its suggestions, the department of investment and public asset management (DIPAM) has finalised a model of strategic disinvestment.
PSUs identified for strategic sale reportedly include profit-making Bharat Earth Movers and Certification Engineers International as well as loss-making Scooters India. With privatisation of PSUs being considered after a gap of over 12 years, it is felt that valuation of equity becomes important in the case of strategic sale of companies that are not listed or in cases where capital markets may not fully reflect the intrinsic worth of a share disinvested earlier.
It is also likely to consider at least five different methods, including relative peer review and discounted cash flow, for valuation of these PSUs identified for strategic sale. The different methodologies also include balance sheet method, transaction multiple, and asset valuation procedure, for the PSUs which will be up for outright sale or involves lowering of government equity below 50%. Finance minister Arun Jaitley had in 2016-17 Budget set a target of garnering ₹ 20,500 crore from strategic sales.
Also Read: Govt to revive strategic stake sale in PSUs
The last strategic sale took place in Jessop and Co in 2003-04 under the NDA government headed by prime minister Atal Bihari Vajpyaee, when 72% of government stake was sold to Indo Wagon Engineering for ₹ 18.18 crore. Incidentally, the first strategic sale in a PSU also happened under NDA rule in 1999-2000 when the government sold 74% equity in Modern Food Industries to Hindustan Lever for ₹ 105.45 crore.
During 1999-2000 and 2003-04, the government had strategically divested stake in 16 PSUs to garner a total of ₹ 6,344.35 crore. These included sale of fuel retailer IBP Ltd to state-owned Indian Oil Corp (IOC) for ₹ 1,153.68 crore. Indian Petrochemicals Corp Ltd (IPCL) was sold to Reliance Industries for ₹ 1,490.84 crore, Videsh Sanchar Nigam Ltd to Tata Group firm for ₹ 1,439.25 crore and Hindustan Zinc Ltd to Vedanta Group for a total consideration of ₹ 768.88 crore.
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