Friday, December 30, 2016

Events that may shape up PSUs in 2017

ANOTHER year has come to an end. The year 2016 was a kind of mixed bag for the PSUs. Whereas demonetization has provided a fillip to public sector banks’ stocks, Centre’s decision to close down 22 ailing and loss making PSUs didn’t go down well among the employees of various PSUs. Here is a broader overview...
of the key events that might shape up the PSUs in 2017.
Clear cut role of Niti Aayog on ailing PSUs:
Though the government think tank has been tasked to evolve a clear cut policy on revival/shutting down of ailing PSUs, Niti Ayoog has so far not been able to come out with any roadmap for the sick entities. The Aayog is expected to succeed to formulate a clear cut policy on the sick PSUs next year. According to public enterprises survey of 2014-15, India has 77 loss-making central public sector enterprises (CPSEs), which include Air India, BSNL, MTNL and MRPL. An analysis of the sick and loss-making PSEs is underway in the NITI Aayog in consultation with the concerned ministries.
Will BSNL and MTNL turn profitable in 2017?
Though Bharat Sanchar Nigam Ltd (BSNL) has reported nearly six-fold jump in operating profit during 2015-16 in the previous fiscal year, its counterpart MTNL is battling to stay afloat in the competitive telecom market. The market has witnessed marked changes following the unveiling of Reliance Jio offer. At the same time, the future for MTNL, another state-run telecom provider looks bleak. Mahanagar Telephone Nigam Ltd (MTNL) employees may soon get a voluntary retirement scheme (VRS) offer of Rs 1000 crore, following an nod from the Telecom Commission, the highest policymaking body of the department of telecommunications (DoT), in April this year. The ministry of communications will seek the Cabinet's approval on the same, in order to cut down high staff cost. So it will be interesting how the two once crowing jewels of the government behave in 2017.
Will government go ahead with strategic sale of ailing PSUs?
Strategic sale of ailing PSUs will top the chart of disinvestment policy of the govt in 2017. Government has approved an ambitious plan to sell loss-making PSUs, subsidiaries and select manufacturing plants to strategic buyers. The Cabinet Committee on Economic Affairs (CCEA) has allowed for strategic sales through a two-stage auction process. The process will involve submitting technical and financial bids. The ailing or loss making PSUs approved for strategic sale include Scooters India, Pawan Hans, Hindustan Newsprint and units of Cement Corporation of India.
Can NTPC cross its new milestone?
NTPC is all set to cross the milestone of over 50,000 MW installed power generation capacity by March-end 2017 with expected addition of over 4,630 MW. The NTPC Group, including its joint ventures and other subsidiaries, will have over 50,000 MW of installed power generation capacity by the end of this fiscal.
Will Air India fly high in 2017? 
For the first time in several years, Air India has not made an operating loss even though its financial condition continues to be “precarious”. Civil Aviation Minister Ashok Gajapathy Raju informed parliament “after many years, this is the first year it has not made an operating loss. It is going in the right direction and I think if this effort continues, it will be an airline we will all be proud of.” So it will be interesting to see whether the Maharaja can fly high in 2017.
Expectations from Union Budget
Post demonetization, Union Finance Minister Arun Jaitley will present the Union Budget 2017-18 on Feb 1, 2017. Like other sectors, the PSUs will also expect to get its share of the cake. Some measures are likely to spell out vis-à-vis disinvestment of PSUs, revival/shutting down of loss making PSUs, a comprehensive policy for revival of ailing PSUs among others. India is likely to move into a low tax rate regime and a comprehensive policy is likely to be unveiled by the finance minister in his budget.
Policy on cash-rich PSUs 
The government is also likely to come out with a comprehensive policy for strategic stake sale that will detail the mode as well as valuation methodology for outright sale of even profit making companies. The policy would cover both profit and loss making CPSEs, much on the lines of the report of two Disinvestment Commissions which had submitted their reports in the previous NDA regime. The option of strategic sale will also be considered for six PSUs. The names of the PSUs are not known. But this option will be explored only when the state governments concerned, which hold minority equity in each of these companies directly or indirectly, are not willing to take them over.
Merger of associate banks with SBI
Another key development of 2017 will be the merger of associate banks with SBI. The government approved the merger in August while the exercise is likely to be over by March 2017. The integration of IT platform -- a key aspect to SBI’s merger with associate banks State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore – is in the final stages. The lender will try to complete the process by March next, making it the 45th largest lender globally in terms of assets. Earlier in September, the central board of SBI had given its stamp of approval for the acquisition of all the five associate banks and Bharatiya Mahila Bank and finalised the swap ratios for the merger. SBI chairman Arundhati Bhattacharya earlier expressed the hope that the bank will be able to finish the merger process by end of the current financial year if everything goes smoothly.

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