Handover of Air India to the Tata Group will bolster government’s privatisation roadmap, which has been significantly lagging the Budget targets so far. Tata has taken over Rs 15,300 crore worth of Air India debt and paid Rs 2,700 crore to the government in cash.The government is also hoping to bring the initial public offering (IPO) of Life Insurance Corporation (LIC) before the end of this fiscal year, while privatisation of Neelachal Ispat Nigam is expected to be completed shortly.
Depending upon the size of the offering, LIC’s IPO and other transactions could help the Centre partly bridge its Rs 1.75-lakh-crore FY22 disinvestment target, of which less than 10 per cent has been raised so far. Including funds received from Air India, the government has, so far, raised Rs 12029.90 crore via stake sales.
Other companies in line for privatisation include Shipping Corporation of India, BEML, Neelachal Ispat Nigam Ltd, Container Corporation of India and Pawan Hans. The government has received financial bids for Pawan Hans and Neelachal Ispat Nigam, and privatisation process has moved to its concluding stage. Privatisation and asset monetisation has been the foremost component of this year’s Budget. The Finance Ministry has unveiled a comprehensive National Monetisation Pipeline, but state-owned banks’ privatisation, a key Budget announcement, is yet to move forward.
State-owned banks and downstream oil major BPCL privatisation is expected to stretch into next year. The enabling framework to enable the privatisation of one of the four general insurance companies, another key budget announcement, has been done. The amendments to the General Insurance Business (Nationalisation) Act being cleared in the Monsoon session of Parliament, but the insurer targeted for the stake sale is yet to be finalised.
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Even as the government is working on pushing the IDBI Bank stake sale this year, regulatory issues relating to promoter ownership and volatility is markets could stretch it into next year. The Banking Laws (Amendment) Bill, 2021 “regarding privatisation of two Public Sector Banks” was listed for introduction in the Winter Session of Parliament. But it was not taken up by the Cabinet, despite a draft being ready. Pullback on the farm laws, bank unions’ opposition to privatisation and upcoming Assembly elections seems to have had a bearing on privatisation timing.
Apart from privatisation, asset monetisation is the key element of this year’s Budget and the government has put out a four-year National Monetisation Pipeline worth an estimated Rs 6 lakh crore. Roads, railways and power sector assets will comprise over 66 per cent of the total estimated value of the assets to be monetised, with the remaining sectors including telecom, mining, aviation, ports, natural gas and petroleum product pipelines, and warehouses.
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