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Tuesday, January 21, 2020

With divestment target under pressure, Centre fast-tracks strategic sales process

CPSEs MMTC, NMDC, BHEL and MECON, along with Industrial Promotion and Investment Corporation of Odisha Ltd and Odisha Mining Corporation, will sell their respective stakes in Neelachal Ispat Nigam Limited to a strategic buyer.

Written by Sunny Verma | New Delhi | Published: January 16, 2020 3:08:59 am
divestment target, CPSEs MMTC divestment, NMDC divestment, BHEL divestment, MECON divestment, indian express Advisors for Neelachal Ispat stake sale to be finalised; four more PSUs in line.

taxThe government is working to finalise advisors this month to assist with strategic disinvestment in Neelachal Ispat Nigam Limited — a joint venture company owned by four central public sector enterprises (CPSEs) and two Odisha state-owned companies.

CPSEs MMTC, NMDC, BHEL and MECON, along with Industrial Promotion and Investment Corporation of Odisha Ltd and Odisha Mining Corporation, will sell their respective stakes in Neelachal Ispat Nigam Limited to a strategic buyer.

Among the other companies where the Department of Investment and Public Asset Management (DIPAM) is working on completing sale to a strategic buyer include Ferro Scrap Nigam Ltd, Cement Corporation of India Ltd, Nagarnar Steel Plant of NMDC and Bharat Earth Movers Ltd, a government official said.

“There is interest among prospective buyers for assets in the metals and minerals sector, given the recent rise in prices globally. We are working on a few companies in the sector where we expect to find a ready buyer,” the official added. The Finance Ministry is working with Steel Ministry to ensure that some of these companies are able to find a buyer within this fiscal or by the first quarter of next year. Unlike in the last financial year, wherein the Centre raised over Rs 15,000 crore through strategic sales, the government has not been able to complete a strategic sale so far this fiscal.

Explained

Steel sector key for govt to meet its targets

With only two and a half months remaining to the end of the current fiscal year, the government is pushing to pursue strategic sales in companies that can find buyers relatively easily. This is important as the government has raised only about Rs 18,000 crore so far out of its target of Rs 1.05 lakh crore through disinvestment in the current year. The strategic sale push in the steel sector could help to partially close that gap in collections from stake sales.

Even as the Centre has already cleared plans for stake sale along with transfer of management control in BPCL, Container Corporation of India Ltd, Shipping Corporation of India Ltd and Air India, the government is unlikely to complete these transactions by the end of the current fiscal year. Sources said the government is hoping that these bunch of disinvestments will be completed in the first half of the next financial year, while this year there will likely be shortfall in collections from stake sales. In this year’s Budget, the government has set a disinvestment target of Rs 1,05,000 crore, compared to Rs 80,000 crore in 2018-19. This fiscal, the Centre has raised only Rs 18,094.59 crore so far — comprising mainly of Rs 4,368.8 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 offering (IPO) of IRCTC, Rs 730.33 crore through offer for sale of RITES Ltd and Rs 475.89 crore through IPO of Rail Vikas Nigam Ltd.

From a list of around two dozen companies that were identified by NITI Aayog along with DIPAM for strategic sales, the Finance Ministry is working to finalise sales of companies in the steel sector to start with. While the Steel Ministry had expressed reservations regarding disinvestment of NMDC’s Nagarnar Steel Plant located in Chhattisgarh, the DIPAM has prepared a detail proposal for disinvestment of this asset. The government has not raised any amount through strategic sale so far this year. Last year, it raised a total of Rs 15,913.96 crore through strategic disinvestment in HSCC (India) Ltd, Dredging Corporation of India Ltd, National Projects Constructions Ltd. The largest chunk came through the PFC-REC deal wherein the Centre sold its entire stake in Rural Electrification Corporation (REC) for Rs 14,499.99 crore to Power Finance Corporation (PFC).

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