New Delhi: The Narendra Modi government is hopeful of privatising national carrier Air India and oil marketing firm Bharat Petroleum Corporation Limited (BPCL) by the first half of 2021-22.
However, the initial public offering (IPO) of India’s largest insurance company Life Insurance Corporation of India (LIC) is likely to take place only after October 2021 as the government prepares the groundwork for a successful listing, said Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management in the Finance Ministry.
In an interview with ThePrint a day after Finance Minister Nirmala Sitharaman announced the government’s intent to privatise majority of the state-owned companies, Pandey said the privatisation policy will be implemented over the next few years.
He pointed out how the shift of management control to private hands is a big structural change from the previous attempts.
“It is a big policy shift where we are saying that the government shouldn’t be in business and these are the four sectors where we will have bare minimum presence. The rest of it will be privatised, or maybe consolidated or closed. But privatisation is the first option. And in non-strategic sectors, we will exit,” he said, adding that this will mean that there will be many state-owned firms that will be lined up for privatisation in the next few years.
Pandey pointed out that the government’s exit from many sectors will help it to neutrally administer its policy-making role.
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Strategic sectors
Sitharaman announced Monday that the government will maintain a bare minimum presence in only four strategic sectors and all central public sector enterprises in other sectors will be privatised.
The strategic sectors can be broadly classified into 4 heads — those important for national security like atomic energy, space and defence; critical infrastructure sectors like transport and telecommunications; sectors like power and minerals important for energy security; and financial services. Niti Aayog has been tasked to work on the next set of public sector enterprises that will be taken up for strategic disinvestment.
Among the firms that are already in line to be privatised in 2021-22 include BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, Bharat Earth Movers Limited, and Pawan Hans.
Besides, two public sector banks and one general insurance company will be taken up for privatisation in the current fiscal, as per the government’s plans.
Pandey said the stake sale in BPCL and Air India will conclude in the first or second quarter of 2021-22 as they are at an advance stage of sale. He added that stake sale of Shipping Corporation of India may also conclude by September but said that Container Corporation of India will take some more time.
LIC’s initial public offering will also take place only after October, he said.
The government is awaiting the embedded value calculations to determine the valuation of the life insurer, he said, adding that many other processes like filing the draft red herring prospectus with the capital markets regulator also have to be completed.
Besides this, the government has moved provisions in the finance bill to amend the LIC act to facilitate bringing down the government shareholding to upto 51 per cent. However, the government is likely to only gradually reduce its stake in the insurer and in small tranches.
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Disinvestment target
Pandey also termed the reduction of the budgeted disinvestment target as “realistic” given the pandemic and the challenges of completing large strategic stake sales.
The budget has set a Rs 1.75 lakh crore disinvestment target for 2021-22, as against the initially budgeted target of Rs 2.1 lakh crore in 2020-21 that was subsequently revised to Rs 32,000 crore.
Of the Rs 1.75 lakh crore disinvestment target, the government has budgeted that it will get Rs one lakh crore from stake sale in financial institutions and Rs 75,000 crore from stake sales in other public sector firms.
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