scorecardresearch
Follow Us:
Wednesday, December 08, 2021

Amid low tax revenues, minority stake sales and privatisation set to dominate disinvestment agenda

The government has cleared plans for complete sale of its equity in BPCL, Shipping Corporation of India Ltd and Air India, while approving majority stake sale in Container Corporation of India Ltd (CONCOR) along with transfer of management control.

Written by Sunny Verma | New Delhi |
Updated: December 27, 2019 4:24:43 am
Modi government, air India disinvestment, BPCL, Shipping Corporation of India, Air India, CONCOR, indian express Last year, the government’s attempt to sell 76 per cent of its equity in Air India did not attract investor interest as the Centre retaining 24 per cent stake in the carrier was seen as dissuading private players.

Even as the government pursued aggressive disinvestment in the last five years, this year was characterised by a clear shift towards privatisation of key state-owned companies, with the Centre planning to exit them fully along with transfer of management control. Going forward, privatisation along with minority stake sales will impart momentum to the disinvestment programme. This has become crucial in balancing the fiscal position of the government in the wake of slack in tax revenues.

The government has cleared plans for complete sale of its equity in BPCL, Shipping Corporation of India Ltd and Air India, while approving majority stake sale in Container Corporation of India Ltd (CONCOR) along with transfer of management control. It has also given in-principle approval to pare down its stake in select central public sector enterprises (CPSEs) to below 51 per cent while retaining management control.

Even as the execution of privatisation proposals may spill over to next year, the government exiting from non-core business has been seen as a key positive by industry. Sources said through these stake sales, the government may raise a total of around Rs 1 lakh crore, which would partially help it in containing the fiscal deficit at 3.3 per cent of GDP by March-end 2020. In this year’s Budget, the government has set a disinvestment target of Rs 1,05,000 crore compared with Rs 80,000 crore in 2018-19.

This fiscal, the Centre has raised only Rs 17,364.26 crore so far — comprising mainly of Rs 4,368.80 crore through further fund offer (FFO) of Bharat 22 ETF (Exchange Traded Fund) and another Rs 10,000.39 crore through FFO of CPSE ETF. It raised another Rs 637.97 crore through initial public offer (IPO) of IRCTC and another Rs 475.89 crore through IPO of Rail Vikas Nigam Ltd.

Apart from IPOs and minority stake sales, privatisation will drive the disinvestment targets of the Centre. In BPCL, the government will sell its 53.29 per cent holding, and in Shipping Corporation of India the stake sale will be 63.75 per cent. In CONCOR, the government will sell 30.8 per cent out of its total stake of 54.8 per cent.

The Centre wants to retain its 24 per cent stake in CONCOR given its importance in the railway sector, but will transfer entire management control to a private player since its remaining stake will be below the critical threshold of 26 per cent. As for the unlisted Air India, the government has decided to sell 100 per cent of its stake in the loss making state-owned carrier — a move that could attract investor interest.

Last year, the government’s attempt to sell 76 per cent of its equity in Air India did not attract investor interest as the Centre retaining 24 per cent stake in the carrier was seen as dissuading private players. Government hopes this time Air India sale will attract investors, especially since it will be done after hiving off a major portion of the airline’s debt.

Out of Air India’s total debt of Rs 58,282.92 crore as on March 31, the government has transferred debt of Rs 29,464 crore from Air India Limited to a special purpose vehicle i.e. Air India Assets Holding Limited (AIAHL). The Centre has provided Rs 1,300 crore to SPV to meet the interest payments October-March 2018-19. Privatisation of these companies in near future could set a precedent for the Centre to exit other non-core areas as well as land and properties across the country.

📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines

For all the latest Business News, download Indian Express App.

  • Newsguard
  • The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.
  • Newsguard
Advertisement
Advertisement
Advertisement
Advertisement