Modi’s statement on PSU show preference for revival

Finance minister Arun Jaitley has budgeted an ambitious disinvestment target of Rs 56,500 crore for FY17

GN Bureau | August 16, 2016


#Arun Jaitley   #Narendra Modi   #PSU  

Prime minister Narendra Modi, during his independence day speech on Monday, said that public-sector behemoths like Air India and BSNL are now making profits. His reference to turning around of loss-making central public sector enterprises (CPSEs) could be an indication that this government has greater confidence in reviving loss-making CPSEs rather than selling them, according to a report by Business Standard.

“In our country, the PSUs are formed to fall in a pit, to fail, to get locked out or to be sold out. That has been the history,” Modi said. “We have tried to bring in a new culture. And today, for the first time, I can say with satisfaction that Air India, which had a bad image, has succeeded in registering an operational profit last year. At a time when telecom companies all over the world were earning, BSNL was falling in a pit. For the first time, BSNL has succeeded in earning operational profit.”

Finance minister Arun Jaitley has budgeted a rather 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, the report added.

On the minority stake sale front, DIPAM has already appointed merchant bankers for Cochin Shipyard, HUDCO, ITDC, NBCC, State Trading Corp, SUUTI, MMTC, National Fertilizers, NMDC, Oil India, Rashtriya Chemicals and others. Additionally, 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.

The report further said that on the strategic sale front, 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.
 

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