|Prime Minister Modi|
In his ID speech, the Prime Minister said: “PSUs in our country are merely...
set up for loss-making units or for turning into sick units slowly and steadily or for disinvestment. This has been the common practice in the past. We have strived to launch a new work-culture. Today, I can point out in satisfaction that we have succeeded to turn the operation of so called notorious Air India into an operational profit-making undertaking during the last year. It is a fact that which all the telecom companies of the world are profit-making units, the BSNL was turning into a heavy loss-making undertaking. We have succeeded in bringing BSNL to operational profit for the first time. Nobody believed that the Shipping Corporation of India could also rake in profit, now it is bringing profit. There was a time when it was apprehended that how would a power factory last for a week. Whether we would be able to get coal for them or not. It also used to be reported that power factories have been shut down for want of coal. Now, we have sufficient stock of coal at the threshold of the power factories. It could be used for months by them. We have achieved it.”
His speech may be a small part of a larger speech outlining government's major achievements over the last two years, it may be an indication that in spite of budgetary announcements, the Prime Minister likely has greater confidence in the process of reviving loss-making PSUs rather than selling them.
Earlier, Finance Minister Arun Jaitley has budgeted an ambitious disinvestment target of Rs 56,500 crore for FY17. Out of which, Rs 36,000 crore is expected to come from the reduction in the Centre's stake in listed PSUs through stake sales and buybacks.
As much as Rs 20,500 crore is expected to come from strategic sales. The rather long process of strategic sales involves NITI Aayog, Department of Investment and Public Asset Management (DIPAM), line ministries and the Cabinet.
DIPAM has already issued RFPs or appointed merchant bankers for Cochin Shipyard, HUDCO, ITDC, NBCC, State Trading Corp, SUUTI, MMTC, National Fertilizers, NMDC, Oil India, Rashtriya Chemicals and others. Hence it has a lot of stake sales planned.
Also, new PSU guidelines demand that every CPSE with a net worth of at least Rs 2,000 crore, and cash and bank balance of Rs 1,000 crore will buy back shares. Coal India, NMDC, Nalco, MOIL and Bharat Electronics have already cleared buybacks and other big PSUs are expected to follow suit.
On the strategic sale front though, there seems to be a lot of confusion, contrasting reports and lack of clarity, especially when it comes to NITI Aayog's role. The Aayog has been tasked with identifying with the PSUs for strategic sale, advising the government on mode of sale, and suggesting methods on valuation of the company.
There have been multiple reports of lists of PSUs which have been sent to the Prime Minister's office, only for the NITI Aayog to send rejoinders when a newspaper named a few of the companies.
A panel under the Aayog, on revival of sick PSUs, has reportedly suggested that any sale of such companies should not include their capital assets like land, machinery, facilities, warehouses, plants etc. But while land banks do seem to have been ruled out of any sale, several policymakers, including Jaitley, have stated that facilities, factories, plants, hotels and office spaces will be considered.
NITI Aayog's, and the government's, two-pronged approach towards revising or selling stake in PSUs comes from the top. While the Centre maintains that it will exit from sectors where the government 'has no business being in business', Modi prides himself for having revived sick PSUs when chief minister of Gujarat. He has pushed for reviving fertiliser plants in Gorakhpur, Barauni, Sindri, and Fertilisers and Chemicals, Travancore.