New Delhi, Aug 11 (IANS) The Centre’s disinvestment plans might have got wings in the past one year but have made little headway in terms of actually making a deal for the cash-strapped government. With the pandemic hitting the economy hard, the sale processes have further been delayed.
The landmark examples of privatisation plans not going as desired are that of BPCL and Air India. The government has been trying to sell Air India for some time now but has not been successful. The disinvestment process of the national carrier was announced in January and the deadline for submitting EoIs has been extended since then.
The government also had to put 100 per cent stake in Air India up for sale after it did not find suitors for 76 per cent stake as announced earlier.
Profit-making oil major Bharat Petroleum Corporation Ltd (BPCL), which has also been put on the block for strategic sale of 52.98 per cent stake, has also drawn a lukewarm response so far. The deadline for submission of Expressions of Interest (EoI) for the company has been deferred, for the third time, till September 30.
The same has been the case with other state-run entities which the government plans to sell. In some cases where a market offering of shares has to be made, the conditions have not permitted the government to go ahead with the sale. In others, the loss-making nature of the unit in question had not found much interest from investors.
The government targets to disinvest its stake in around 23 PSUs. In the Union Budget for FY21, the government had set a disinvestment target of Rs 2.1 lakh crore. The target was, however, described as ambitious by many, as the Centre didn’t reach anywhere near it in the last fiscal and it got revised downwards twice.
Even this year, the progress of disinvestment is sluggish and all hopes lie on the BPCL privatisation to reach anywhere close to the targeted disinvestment proceeds.
Another concern also is the amount of money the government would make at this phase even if a deal is struck, given the impact of Covid on valuations.
Several experts suggest that the government can go slow now as the response is not as expected and wait till the economic situation revives and the strategic sales bring in good money with high valuations.
Former member of the erstwhile Planning Commission, Arun Maira told IANS that there is no need for the government to be desperate and sell assets during a depressed economic situation when they may not fetch good money. Rather, the government can wait till the situation improves, he added.
He noted that if the government urgently requires money to spend, then it has other means including more borrowing and printing of notes, which, he noted, may impact the government’s own finances as well as impact the value of the rupee.
Maira, however, said that now is not the time to think of those factors.
“These old rules of maintaining the government deficit at a certain level as well as making sure that the value of currency is maintained… those rules don’t apply at this time,” he said.
“I do feel, overall, it’s not a reason to be desperate to sell at this moment.”
Former Cabinet Secretary B.K. Chaturvedi was also of the view that even if the disinvestment plans go through at this moment, they may not fetch good prices.
Calling for the government to be careful in its disinvestment moves, he said: “Many of the disinvestments they do, they may not fetch them a very good price…”
He noted that the government should look at resources to raise revenue to meet their expenditure needs, but privatisation should not be the only focus.
Former Secretary, Department of Economic Affairs and Disinvestment, Atanu Chakraborty, however, was of the view that interest among private players seems to be present and the valuation has more to do with the company itself or the sector concerned, rather than the pandemic impacting it.
He also noted that the only impact which the pandemic might have caused on the disinvestment processes is the delay in physical due diligence, which is a major procedural activity in terms of strategic sale.
“When you wish to sell a company, lock, stock and barrel, there are issues of due diligence, specially the physical due diligence…, not that doing it is improbable, as of now, that is doable but the physical issues involved may delay it slightly,” Chakraborty told IANS.
He added that interest in the market and capital inflow has been taking place, largely in terms of minority stake sale. Regarding strategic sale where management control also gets transferred, the physical due diligence is an aspect which may cause the delay in the times of Covid.
Tuhin Kanta Pandey, Secretary for Department of Investment and Public Asset Management (DIPAM), last month had said that the pandemic has put brakes on the strategic disinvestment plans, to a great extent, as the process requires physical movement of people and checking of documents, which came to a halt amid Covid.
But the Covid blues do not seem to deter the government from going into a selling spree as it is preparing a new disinvestment policy whereby some state-run banks and insurance companies would also be up for sale, according to people in the know.
Announcing the Aatmanirbhar Bharat economic package in May, Finance Minister Nirmala Sitharaman had said that the government will exit from all non-strategic areas of business. But for now, it seems, although the government is ambitious, the Covid-induced slowdown may stretch the timeline to achieve its plans.
–IANS
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