BackCentre to unveil fine print of new privatization drive
The proposed policy may also include revised norms for timely closure of sick PSUs
PremiumFinance minister Nirmala Sitharaman is likely to provide details about the government’s proposed public sector undertakings (PSUs) policy in the Union budget on Monday, which will pave the path for consolidation of strategic state-run companies and privatization of non-strategic ones.
The policy may also include revised guidelines for time-bound closure of loss-making PSUs and disposal of their assets, as reported by Mint on 14 January.
The Union cabinet on Wednesday considered the new policy, a government official said, requesting anonymity. However, no official announcement was made. When a minister wants to make a separate announcement about a decision, it is kept out of the regular cabinet briefing, the official said. However, as the Union budget is just days away, the finance ministry has not made any announcement. Ministry officials Mint approached for comment declined to speak about the issue ahead of the budget presentation next week.
The focus of the government led by Prime Minister Narendra Modi on non-tax revenue comes at a time tax revenue, barring that from petrol and diesel, has nosedived in the financial year. In the first eight months of this fiscal, overall tax receipts had contracted more than 17% year-on-year.
The government is also preparing to auction 5G telecom spectrum, but it remains to be seen how much revenue the exchequer gets from that given the stress the telecom sector, barring Reliance Jio Infocomm Ltd, is facing.
As part of the government’s Atmanirbhar package in May, Sitharaman had announced that there will be at least one state-run company in strategic sectors while PSUs in non-strategic sectors will be privatized.
“In strategic sectors, at least one enterprise will remain in the public sector but private sector will also be allowed. In other sectors, PSUs will be privatized," she had said. The timing of privatization of PSUs will be based on feasibility. To minimize wasteful administrative costs, the number of enterprises in strategic sectors will ordinarily be one to four. Others will be privatized or merged or brought under holding companies, Sitharaman had said.
The policy may open the possibility of further consolidation of India’s 12 public sector banks. The Centre had started the first round of consolidation after approving the merger of Vijaya Bank and Dena Bank with Bank of Baroda in 2018, which was followed by the merger of 10 banks into four starting 1 April 2020.
The government is in the process of selling loss-making national carrier Air India after two recent attempts failed. One major hurdle in the case of the Air India disinvestment is the accumulated debt. In the latest sale effort, the government sought bids on the enterprise value of the carrier. The Modi government had set an ambitious disinvestment target of ₹2.1 trillion for the current fiscal but has so far realised only close to ₹18,000 crore as the pandemic stalled stake sale efforts. Previously, the government had restructured its holding in state-run companies such as ONGC and HPCL leveraging the synergy between energy companies, which also led to revenue receipts for the exchequer.
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