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Government rides on privatisation to meet Rs 800 billion divestment target

New Delhi: The government is banking on privatisation or "strategic sale" of several state-owned companies and properties to meet its divestment target of Rs 800 billion for FY19, reports The Business Standard. While it recently sold stakes in HPCL to another state-owned oil company, the government is also looking at several other properties to sell off such as Air India, Pawan Hans, Dredging Corp, HLL Lifecare and Indian Medicines Pharmaceutical Corporation Limited, confirmed an official in the know-how of the development.  

It has also come to light that the government is planning to part away with at least five Indian Tourism     Development Corporation (ITDC) hotels in the upcoming fiscal, starting off with properties in Ranchi and Jaipur. Besides, NBCC might also acquire Bridge and Roof Co, added the report.  

 

Dipam or the Department of Investment and Public Asset Management has already issued a pool of requests for proposal on its website regarding the aforementioned companies. The official, while disclosing the divestment plans of the government, said the Centre is also discussing sale of ITDC hotels with respective state governments. The report also adds that Dipam would issue an additional portion of its two public sector undertaking exchange-traded funds, including Bharat 22, to fulfill the divestment target for the year 2018-19.  

Government officials, however, admit that the process involved in divestment is not easy and it has been officially confirmed that the record proceeds of the current fiscal will be very hard to achieve again. It may be noted that the target has been lowered for 2018-19; the revised estimate for 2017-18 was a staggering Rs 1 trillion.  

The official went on to say that Rs 1 trillion worth divestments is very hard, and is unlikely to occur soon. The government has a steady approach towards asset sale, said the official, adding that Rs 500-700 billion a year is a realistic target but not easy by any means.  

"But we have a robust pipeline of planned stake sales," the official said.  

Currently, the government has also proceeded with a number of initial public offerings as well - these include railways and defence companies such as Indian Railway Catering and Tourism Corporation (IRCTC), Rail Vikas NIgam Limited, Mazagaon Docks, Garden Reach Ship Builders and Mishra Dhatu Nigam Limited, added the report.  

There are several mergers in the pipeline as well, confirmed sources, adding that the merger of ONGC and HPCL was one of the initial deals. It has come to light that three government insurance companies - Oriental, National and United India - would be merged before offering an IPO for the same.  

The strategic sake of assets is one of the key targets of the government this year, as mentioned by Finance Minister Arun Jaitley during his Budget speech. He said, "The government has approved listing of 14 CPSEs (central public sector enterprises), including two insurance companies, on the stock exchanges. The government has also initiated the process of strategic disinvestment in 24 CPSEs. This includes strategic privatisation of Air India.” 

In line with Jaitley's financial roadmap, works are on for the sale of a number of assets; the government plans to sell 10 percent stake in NHPC, Power Finance Corporation and SAIL; about 15 percent in NLC; another five percent in Rural Electrification Corporation, and three percent in Indian Oil Corporation.