Privatization: Changing tracks aided Air India, derailed BPCL sale


India is seeing another set of major privatizations since the ’90s. The latest in this set of over boardings of CPSE is the Air India.

Since the 90s, India has been in trouble with the question of privatization of publicly owned companies. After that, India has not seen any major privatization until Air India’s sale to the Tata’s.

Air India has been suffering loss for many years with the government doing its best to salvage it. But recently, the government changed its track when they changed their ownership hold from 76% to 100%.

The government also gave the buyers the freedom in deciding the amount of debt they could take over.

This attracted many major bidders, with Tata outbidding them all. It was also a great moment for the conglomerate considering the airline’s origin from them.

But this sweet story, might not be repeated in another high-profile bid. This time the bid is over BPCL. Unlike coming up, with a governmental stake of 26% with management control, it has offered 52.98% of its ownership.

That is contrary to the successful method the government has followed during the sale of Hindustan Zinc and Balco. This move has been a grave mistake for the government, which was seen during the auction.

In the auction, only three bidders came. Two of them struggled to get finances for the acquisition as per the current market value of $10-12bln. As a result, the privatization drive is lagging with many criticizing the government’s policy.

When it comes to disinvestment in India, the nation is going to see the largest of its kind. Life Insurance Corporation (LIC) India’s largest insurer, is going in for an IPO in the January-March quarter of 2022. The government owns 100% of it.

The year 2021 was a landmark year in the liberalisation history of India. It was a time when most of the public shed the taboo against privatisation.

It was also the time when the government classified public sector companies and declared its disinterest in business.

The two categories are- strategic and non-strategic. There is an enthusiasm for clearing out the companies under the non-strategic. The government declared its policy of running only a bare minimum of PSUs and getting rid of sick parts of the economy.

The bare minimum means only retaining four sectors in the economy. They are atomic energy, space, defence, transport, telecommunications, power, minerals, banking, insurance and financial services.

In the 2021-2022 budget, there is a target of ₹1.75 lakh crore through disinvestment. Out of this ₹1 lakh crore from sale of government stake in PSU banks and insurance companies, with ₹75,000 crores being budgeted from CPSE stake sale.

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