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In line for consolidation, strategic sale: Several engineering, metals, chem cos

The government sees privatisation and consolidation of state-owned companies in certain sectors where they are overrepresented as the second “generation reform” that is necessary to give a structural push to growth.

Written by Sunny Verma | New Delhi | Published: June 10, 2020 3:00:39 am
nirmala sitharaman, government’s privatisation push Finance Minister Nirmala Sitharaman. (File Photo)

A privatisation push from the central government is expected to see a number of state-owned companies in the engineering, metals & minerals and chemicals sectors being either consolidated by other PSUs or strategically sold to private sector companies, sources familiar with the discussions said. The government sees privatisation and consolidation of state-owned companies in certain sectors where they are overrepresented as the second “generation reform” that is necessary to give a structural push to growth.

“This is part of the second generation reforms that has been launched. The change in Essential Commodities Act has come about after realisation that imposition of stock limits does not have much of an impact and hence it is being significantly modified. Similarly on the agriculture side, we have continuing reforms in this direction through liberalisation of the APMC (Agriculture Produce Market Committee) Act. Opening up of coal and mining sector, tariff reforms in the power sector are all moves that have to be seen in the larger context of privatisation,” a senior government official told The Indian Express.

Sources said chemicals, engineering, and metals and minerals sectors are among the areas that are immediately on the radar for either consolidation among government entities or stake sale. In chemicals, engineering and metals sector, the government has presence through a total of around 10 firms in each sectors which are part of the S&P BSE CPSE Index.

For instance, in the engineering sector, the government has presence through a large number of companies such as RITES, ITI Ltd, Rail Vikas Nigam, Bharat Dynamics, Bharat Electronics Ltd, Bharat Heavy Electricals Ltd, Engineers India, Garden Reach Shipbuilders & Engineers, Hindustan Aeronautics Ltd and BEML Ltd, among others. “These are the kind of sectors which can be serviced by private companies but have significant government presence. These are among the areas that will come up for consolidation when the policy is finalised,” the official said.

Explained

Builds on earlier measures

The government believes this plan builds on similar measures taken in agriculture, coal and mining areas where further liberalisation has been announced.

In petroleum and power sectors, the government has already done significant consolidation, while BPCL is being sold to private sector entities, the sources said, indicating that energy and power sector may not require further strategic sales to private entities. Finance Ministry officials did not respond to an email seeking comments for this story.

Finance Minister Nirmala Sitharaman last month said a new coherent PSE policy will be announced, opening all sectors to private players with public sector enterprises (PSEs) playing an important role in defined areas.

“The policy on Public Sector Enterprises will make it very clear, strategic sector and non-strategic sectors. Public sector entities will be restricted to one to four in the strategic sector, and greater private sector participation will generate efficiencies,” the official said. The policy on PSEs is being prepared in consultation with NITI Aayog, which earlier finalised a list of government companies and their individual assets for strategic sale.

As part of the privatisation plans, the government has cleared plans for complete sale of its equity in Air India, BPCL, Shipping Corporation of India Ltd, while approving majority stake sale in Container Corporation of India, along with transfer of management control.

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