The shape of India’s selloff plan: 300+ PSUs may shrink to barely two dozen
The government may reduce the number of public sector enterprises to just around two dozen, from over 300 at present, following the new policy that focuses on privatisation in non-core sectors, while shutting down loss making state-run enterprises.
Top government sources told TOI that the final number will be decided by the Union cabinet based on recommendations by NITI Aayog, which has been tasked with identifying the next set of companies to be offered for strategic sale. The budget has made it absolutely clear there will be only four key strategic sectors and in these key segments, there will be a maximum of three or four public sector units.
All other areas where there are PSUs, the government will move out and there will be less than two dozen PSUs left. This will include banks and insurance companies, especially in the general insurance space.
In her third Budget, FM Nirmala Sitharman had identified atomic energy, space, defence, transport, telecommunications, power, petroleum, coal and other minerals and banking, insurance and financial services as strategic sectors. The policy states that in the strategic sectors, there will be bare minimum presence of the public sector enterprises. The remaining CPSEs in the strategic sector will be privatised or merged or subsidiarised with other CPSEs or closed. In non-strategic sectors, CPSEs will be privatised, otherwise shall be closed.
The policy marks a huge shift in the government’s attitude towards privatisation of state-run companies and flags its commitment to go ahead with the process. There is a clear shift to involve the private sector and global investors to bring in efficiency and provide much needed cash for the government to help revive the economy hit sharply by the Covid-19 pandemic.
According to the Public Enterprises Survey 2018-19, there were 348 central public sector undertakings as on March 31, 2019, out of which 249 were operational. Remaining 86 were under construction and 13 were under closure or liquidation.
The policy comes with its own set of challenges. For instance, government officials said, there were nearly a dozen consulting firms, such as Engineers India, where the appetite may be low. “It will be easier to set up a new consulting company, and get manpower from some of the PSUs, instead of taking over the entire baggage,” a senior officer told TOI.
Besides, the government will also need to carefully weigh the appetite for large stake sale. For instance, back to back privatisation of companies in sectors such as oil may not find too many takers or fetch the government adequate value. “We have to calibrate our strategy. It will also depend on the condition in the sector,” an officer said.