Modi government formulates policy on strategic stake sale as part of privatizing PSUs


The Modi government is formulating a formal policy relating to the sale of stakes, including transfer of control in state-run companies as a part of the idea of privatizing non-strategic Public Sector Undertaking(PSUs).The initial emphasis of the policy will be on the loss-making companies. The officials of the finance ministry and the department of public enterprises which act as the  nodal agency for all state-run companies has discussed in details on the  rules for identifying companies and processes involved. The government’s aim is to exit all loss-making firms except for those firms  that have strategic importance.

According to the statistics  there are  71 loss-making state-run companies in  India  whose  aggregate losses amount to Rs 20,000 crore in 2013-14. A preliminary discussion was held on how to approach the strategic sales where it framed the policy for diluting the minority stakes in profit-making companies and to meet 25% public holding norms. The government has set an ambitious disinvestment of Rs 69,500 crore as target for this fiscal year in which Rs 28,500 crore is expected to come from strategic stake sales.

The strategic sales in profit-making PSUs were common during the Atal Behari Vajpayee led NDA administration. During this period the government held its control on the blue chip firms such as VSNL, IPCL, Balco and Hindustan Zinc to private companies. But the Modi regime has not been able to make much progress on strategic sales on these firms. On this basis the capital market regulator’s listing norms has stipulated that there should be a public holding of at least 25% in state owned companies.

Finance Minister Arun Jaitley has proposed that  the government will proceed with its strategic sales in some state-run enterprises and the  Ministry of tourism has  already moved ahead. Tourism Minister Mahesh Sharma had already  ruled out the disinvestments  in India’s Tourism Development Corp .He said that the government was exploring exits in eight loss making hotels through public-private partnerships or leases. The Ministry of heavy industries has already floated Cabinet notes on the closure of four entities such as Hindustan Machine Tools and Tungabhadra Steel Products.

As the part of new policy the government has decided to wind up of Board for Reconstruction of Public Sector Enterprises (BRPSE) which was set up in 2004 to prepare plans to revive sick state-owned companies.



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