GoM to decide bare minimum PSUs in strategic sectors: Tuhin Kanta Pandey, DIPAM secretary – The Economic Times

Clipped from: https://economictimes.indiatimes.com/news/economy/finance/gom-to-decide-bare-minimum-psus-in-strategic-sectors/articleshow/80659733.cmsSynopsis

The government’s focus will be on strategic divestment as its shareholding in most PSEs is close to 51%, leaving little room for minority stake sales.

New Delhi: The bare minimum presence of public sector enterprises (PSEs) in strategic sectors – announced by finance minister Nirmala Sitharaman in the budget – will be decided by a group of ministers after consulting ministries in each identified sector, Department of Investment and Public Asset Management (DIPAM) secretary Tuhin Kanta Pandey told ET on Tuesday.

“The formulation, which has come after the Cabinet approval, is what the FM stated. A group of ministers – what we call an alternative mechanism – will go into an after-analysis, they will then find out what is the bare minimum (sector by sector),” he said in a post-budget interview.

Identification of PSEs will result in a potential pipeline of companies to be disinvested and require Cabinet approval. However, privatisation of companies will depend on timing, sequencing and the response of potential investors. The process will take four to five years, given the large number of PSEs.

“In the case of non-strategic sectors, if privatisation does not succeed, it (PSE) could be closed, while in case of strategic, you could also look at consolidation… but the key is privatisation,” Pandey said.

‘PSEs Must Turn Competitive’
The government has identified four strategic sectors – atomic energy, space and defence; transport and telecommunications; power, petroleum, coal and other minerals; and banking, insurance and financial services – where presence of state-run companies will be reduced to a minimum. Niti Aayog has been tasked with drawing up the next set of CPSEs to be taken up for strategic disinvestment. Pandey said the process will take place simultaneously.

Asked if privatisation could face resistance from states and worker unions, Pandey said it was time for states to shed their baggage and divest PSEs that were not growing. Indian PSEs must turn competitive and technologically nimble to become global players, he said.

The government’s focus will be on strategic divestment as its shareholding in most PSEs is close to 51%, leaving little room for minority stake sales. “Minority stake sale, where we didn’t pass control, has more or less run its course… going forward, it will be strategic sales, which means privatisation,” he said.

Life Insurance Corporation of India will be one of the PSEs that will fall under the bare-minimum criteria, and its initial public offering will lead to wider public ownership, Pandey said.

Monetising Assets
The finance minister had said idle assets will not contribute to Aatmanirbhar Bharat and that non-core assets largely consist of surplus land with government ministries, departments and PSEs.

Such assets, including housing complexes, will be monetised through demergers or hive-offs by CPSEs on their own or through a special purpose vehicle (SPV) so market value is obtained and distributed to stakeholders.

The department has told PSEs that their asset monetisation plans will be taken into consideration through a marking system during their annual performance evaluation, and will be linked to performance bonuses. “This (incentive) will also be an element going forward, where we will see whether PSEs are conscious of preparing asset monetisation plans and executing them,” said Pandey.

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