CPSEs may be looked at to rescue FY21 divestment plan

By Subhash Narayan

New Delhi, April 28 (SocialNews.XYZ) The government may again shift reliance on cash-rich and financially stronger central public sector enterprises (CPSEs) to rescue the disinvestment and strategic sale programme with a view that the economic crisis due to the Covid-19 pandemic will dampen interest of private sector domestic and overseas investors' in taking controlling stake in the government-owned companies.

According to the people in know, the Department of Investment and Public Asset Management (DIPAM) might consider offering several proposals for the sale of majority government holding in sick and loss-making companies this year to willing CPSEs, proposing to give a good valuation. This, it's believed, would eliminate the need to go through a complex sell-off process with no result at the end.

The CPSEs might also be considered to bid for the government stake in profit-making entities, if strategic sale plan involving private sector entities failed to get response, sources said.

This could mean if the government fails to get desired response for sale of equity in BPCL, it may consider getting offers from another CPSEs, like IndianOil that had indicated its interest in the refiner. The current terms of bids invited for BPCL bar PSUs with 51 per cent government equity to participate.

The government is looking at CPSEs again due to poor investor response to some of strategic sale initiatives. In the case of Pawan Hans Helicopters, where the government offered to sell its entire 51 per cent stake to strategic investors last year, it failed to attract any investors, forcing more than four extensions for submitting expressions of interest.

Similarly, in the absence of bidders, the government may look to shut Hindustan Prefab than offering it to a strategic investor. Though it is in the list of 28 companies where the government has given 'in-principle' approval for strategic divestment.

"Several sick and loss-making CPSEs suffer from shut operations and excessive manpower. If in some way these issues could be sorted out before an entity is put up for the strategic sale, valuations and interest would be high. Getting PSUs on board is a good plan. But the government should allow its companies to take investment decisions on their own rather than pushing them into any uneconomic move," said a former Cabinet Secretary.

Sources said the DIPAM was enthused by last year's Rs 4,800 crore deal between GAIL and an IL&FS subsidiary to take over the latter's 874 MW of operational wind projects. Also, this year NTPC acquired the Centre's stake in other power sector PSUs - NEEPCO and THDC -- for Rs 11,500 crore. Earlier, ONGC completed acquisition of government's stake in HPCL.

In strategic disinvestments in five CPSEs -- HPCL, REC, HSCC, NPCC and DCIL -- the tabs for which were picked up by other CPSEs, like ONGC, PFC, NBCC, WAPCOS, and public-sector consortium of ports, respectively, the government has mobilised Rs 52,828.8 crore in receipts.

More such options would be looked to bring several other strategic disinvestment proposals that have got delayed over lack of investor interest. In the list are 28 companies, like Scooters India, Ferro Scrap Nigam, Bridge and Roof, Hindustan Fluorocarbons, India Medicines and Pharmaceuticals, Engineers Projects, National Project construction corporation (NPCC) and Hindustan Newsprint.

Officials believe, if PSUs are involved in strategic sale, it could provide synergy to existing operations of a state-run company and the sell-off process would not only be smooth but the government could also get better valuation. It has also become important this year as global and domestic interest from the private sector could be tepid due to the Covid-19 outbreak.

The government's strategic sale initiative has not taken off well as a few cases that were brought out under the plan failed to attract investors. Air India's earlier disinvestment bid also fell flat for want of bidders. It's up again for bidding, but the process looks uncertain. Similarly, attempts to sell other loss-making entities, like Scooters India, makers of the popular Vikram brand of three-wheelers, failed to move in the last one year.

Companies, like Scooters India, Indian Drug and Pharmaceuticals (IDPL) and a few others, are sitting on huge tracts of land that can be used by cash-rich PSUs to expand operations or carry out any diversification plan. While IDPL has 834 acres prime land in Rishikesh, Scooters India, about 150 acres near Lucknow.

The government is looking at revised strategy to save the Rs 1,20,000 crore disinvestment plan for FY21. In FY20, the government initially budgeted Rs 1,05,000 crore as disinvestment proceed. But it was revised to Rs 65,000 crore as choppy market conditions and economic slowdown prevented interest from investors.

The actual disinvestment proceeds for FY20, however, remained even below the revised numbers at Rs 50,300 crore.

(Subhash Narayan can be contacted at subhash.n@ians.in)

Source: IANS