Strategic Disinvestment: PSU sell-offs to be monitored by external body

“Strategic disinvestment is where we are divesting equity along with the management control. So on that very process the role has been assigned to Niti Aayog,” Gupta said. He said Niti Aayog will to identify Central Public Sector Enterprises (CPSEs) where government should exit from management control, to extent they should exit and what should be the mode of divestment.

The Niti Aayog will make recommendations on strategic sales to a core group of secretaries, headed by the Cabinet Secretary. The group of secretaries will make final suggestions to the Cabinet Committee on Economic Affairs on the mode and quantum of strategic disinvestment.

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This is a major departure from the existing practice wherein disinvestment department was primarily tasked with pursuing strategic disinvestment.

The Budget 2016-17 has set the total target for disinvestment for 2016-17 at Rs 56,500 crore, out of which Rs 36,000 crore is estimated to be raised from minority stake sale in public sector companies, while Rs 20,500 crore is estimated to be raised from strategic sale. The government would start the strategic stake sale process from the next financial year.

The government is expected to pursue minority stake sale in the current month as well. In the revised estimates for 2015-16 in the budget, the government has pegged receipts from disinvestment at Rs 25, 312 crore, as against actual receipts of Rs 18,374 crore in the fiscal year so far. To meet the revised estimates, the government will have raise another Rs 6,938 crore through disinvestment by March.

“The (revised) estimates are there and we will look at the markets. There are other parallel processes also running, so wait and watch, but we are not selling in distress.” he said. The government is pursuing a number of options on disinvestment and not limiting only to the offer for sale (OFS) route to sell stakes, Gupta said.

On the issue of the Centre renaming the Department of Disinvestment as the Department of Investment and Public Asset Management (DIPAM), Gupta said a lot of thought went behind this transformation as the idea was to pursue the larger aim of managing public investment more effectively.

Apart from the stake sale process, DIPAM will also examine and review a number of issues concerning CPSEs such as their capital restructuring needs, capex plans, availability of free reserves and how are these being deployed, the dividend and bonus policies of these companies.

“Definitely the change in name (to DIPAM) underlines the new approach and focus of the government in management of investment in CPSEs, which is very large. For example, out of 235 CPSEs only 44 are listed, and these 44 CPSEs command more than 12 per cent of the market cap,” Gupta said.

“Now disinvestment is one of the processes, it is part and parcel of your investment management…The larger objective of disinvestment is that government would like to leverage disinvestment for higher economic growth and activity, including through expenditure by the CPSEs,” he said.