Tuesday, July 8, 2014

Will NDA government outline steps for privatising PSUs in the Union Budget?

AS THE NDA government is going to present its maiden budget after the comprehensive victory in the Parliamentary elections, hopes and expectations are high among the masses and the corporate houses for a growth-oriented financial statement reflecting the Government's commitment for prosperity. But what the public sector undertakings can hope from the Modi sarkar?
Two aspects relating to this sector are likely to be addressed in this Budget. The first is availability of coal with some focus on the private sector participating...
in this sector. The other is ensuring that the sector is robust with emphasis on the discoms and the restructuring of state electricity boards. Subsidized power to the farm sector would be a contentious issue though it is being done by states. Also given that the monsoon would be less than satisfactory this year the government may not overemphasize this aspect this time.
Moreover, Finance Minister Arun Jaitley could target a record Rs 700 billion in proceeds from asset sales when he unveils his maiden budget. No doubt divestment of the profit making PSUs is pone of the key priority areas of the NDA government and Jaitley is expected to unveil a comprehensive package for selling government shares in these state-owned PSUs.
Some of the key PSUs where the government may offload its stake include:
Steel Authority of India (state shareholding 80 percent). The government is keen to sell 5 percent of Steel Authority of India Ltd in the last week of July. Roadshows for the deal, worth about $340 million at current prices, will begin soon after the presentation of the budget on July 10.
Coal India (89.7 percent is govt share now): The world's largest coal miner is not in bets shape and its failure to meet output targets means that India is the third largest importer of coal. BJP might restructure the business into smaller, regional units and open up the industry to foreign investors.
Now, the government is considering a direct sale of a 10 percent stake that will give it around $4 billion at current prices.
Hindustan Zinc (29.6 percent)
The government would like to sell its entire minority stake in Hindustan Zinc, a subsidiary of London-listed Vedanta Resources Plc, India's largest mining and non-ferrous metals producer controlled by tycoon Anil Agarwal. The stake, now worth $3.6 billion, was slated for sale last year but the deal was derailed by industry opposition.
Bharat Aluminium (49 per cent)
The government may also auction the 49 per cent it still owns in Bharat Aluminium Co. Ltd. It sold 51 per cent a decade ago to Sterlite Industries, itself part of Agarwal's Vedanta group.
NHPC (86 percent)
A 10-percent stake in hydroelectric power producer NHPC is being considered for sale.
Hindustan Aeronautics (100 percent)
The government is also considering selling a 10 per cent stake in Hindustan Aeronautics Ltd, or HAL, in addition to raising the 26 per cent cap on foreign participation in joint ventures in the defence industry.
Power Finance Corporation (72.8 per cent)
Power Finance Corporation, whose role is to finance power projects, was floated in 2007 and the government is considering selling a further 5 per cent stake.
Rural Electrification Corporation (65.6 percent)
Rural Electrification Corporation, floated in 2008, promotes and funds rural electricity projects. The government is considering a 5 percent stake sale.

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