File image of Prime Minister Narendra Modi | Photo: Praveen Jain | ThePrint
File photo of Prime Minister Narendra Modi | Praveen Jain | ThePrint
Text Size:

New Delhi: In a big step towards privatisation of many state-owned firms in its second term, the Narendra Modi government has identified 18 strategic sectors, including banking, insurance, steel, fertiliser, petroleum and defence equipment, where it will retain only a limited presence, ThePrint has learnt.

If implemented in its entirety, it will mean the government is completely exiting non-strategic sectors through privatisation or strategic disinvestment. Even in strategic sectors, there will be a maximum of four public sector units and a minimum of one unit operating. 

The Department of Investment and Public Asset Management (Dipam) functioning under the finance ministry, which moved a cabinet proposal last month on ‘Redefining Public Sector Participation in Commercial Sector Enterprise’, has classified 18 strategic sectors into three broad segments — mining and exploration, manufacturing, processing and generation, and the services sector. 

In the mining and exploration segment, the areas where government will retain limited presence are coal, crude oil and gas, and minerals and metals.

Similarly, in manufacturing, processing and generation segment, the areas where the government will retain limited presence are defence equipment, steel, petroleum (refinery and marketing), fertilisers, power generation, atomic energy and ship building.

And, in the services sector, the areas identified are — power transmission, space, development and operation of airports, ports, highways and warehouses and gas transportation and logistics (not including  gas and petro-chemicals trading), contract and construction and technical consultancy services related to strategic sectors and subsectors, financial services for infrastructure, export credit guarantee, energy and housing sectors, telecommunications and IT, banking and insurance.

The biggest fallout is expected to be on sectors like banking, where a large number of state-owned banks operate. Even after the merger of 10 state-owned banks into four last year, and the mergers in 2017 and 2018, there are still 12 state-owned banks in India.


Also read: Fiscal stress offers Modi govt great opportunity to push disinvestment


‘Private investors can prove to be a game-changer’

According to the plan, even in sectors that the government proposes to continue its presence, it will hold only that much stake in a firm that is required to retain control. 

But the timing of the government’s exit will depend on a number of factors, including market conditions and the feasibility of the proposal.

Sources in the government said that private sector participation will infuse private capital, technology, innovation and bring in best management practices. 

“It will give a big boost to the economy by generating jobs. The sectors have huge potential, which is not being realised now because of various reasons. Private investors can prove to be a game-changer in such a scenario,” said a senior official in one of the infrastructure ministries.

According to the Dipam proposal, unlocking of resources by strategic disinvestment of public sector enterprises could be used to finance social sector and development programmes. 

India has 348 public sector enterprises and the net worth of the government’s holdings in these firms is around Rs 7 lakh crore, according to government estimates. 

If implemented in its entirety, it would be the government’s most ambitious disinvestment plan since 2000 when the Atal Bihari Vajpayee government had started the process of completely exiting public sector firms.

Finance Minister Nirmala Sitharaman had in May announced the government’s intent to reduce its presence in many sectors and allow private participation in all sectors. 


Also read: Modi govt disinvesting in PSUs crucial but here’s why privatisation is easier said than done


Mix of further mergers of banks and privatisation likely

Government sources said the finance ministry will notify the policy within one month of cabinet approval. However, the actual implementation will take much longer.  

“It is an announcement of intent. Steps will have to be taken to bring down stakes in these PSUs and eventually exit,” said a senior finance ministry official. 

On the banking sector, the official said, the government’s first priority at present is to offload its remaining stake in IDBI Bank as announced in the budget.

In 2018, the Life Insurance Corporation had picked up a majority stake in the bank leaving the government with around 46 per cent shareholding.

“There could be a mix of further mergers among banks and privatisation to bring down the number of state-owned banks to four,” the official added. 

Where the policy will not apply

Sources in the government said the proposed policy will not apply to autonomous organisations or trusts, regulatory authorities, refinancing institutions — many of which have been created through Acts of Parliament — such as major port trusts, Airports Authority of India, among others.

It will also not apply to central public sector enterprises that provide support to vulnerable groups through financing of SCs, STs, minorities and backward classes, security printing and minting, organisations like railways and posts that undertake commercial operations with a development mandate.

Department and organisations like railways, airports, ports and National Highways Authority of India, which are not covered under this policy but have undertaken asset monetisation or privatisation of various operations or activities, will continue to do all these.


Also read: India’s public sector enterprises: Where do we go from here?


 

Subscribe to our channels on YouTube & Telegram

Why news media is in crisis & How you can fix it

You are reading this because you value good, intelligent and objective journalism. We thank you for your time and your trust.

You also know that the news media is facing an unprecedented crisis. It is likely that you are also hearing of the brutal layoffs and pay-cuts hitting the industry. There are many reasons why the media’s economics is broken. But a big one is that good people are not yet paying enough for good journalism.

We have a newsroom filled with talented young reporters. We also have the country’s most robust editing and fact-checking team, finest news photographers and video professionals. We are building India’s most ambitious and energetic news platform. And have just turned three.

At ThePrint, we invest in quality journalists. We pay them fairly. As you may have noticed, we do not flinch from spending whatever it takes to make sure our reporters reach where the story is.

This comes with a sizable cost. For us to continue bringing quality journalism, we need readers like you to pay for it.

If you think we deserve your support, do join us in this endeavour to strengthen fair, free, courageous and questioning journalism. Please click on the link below. Your support will define ThePrint’s future.

Support Our Journalism

13 Comments Share Your Views

13 COMMENTS

  1. Yee..sirf logo ko ullu bana rahen hai …inhone privatisation kar ke jobs khatam kar di or kah rahen hai ki job opportunities badhegi..abhi toh privatisation kya hai …kal global leaders or businessmans ko bula kar auxen kar ke pura dekh ko hi bech dalenge….pur bolenge … country is developing…..jatibad toh chal hi raha hai …toh jayada time nahi lagega ye ….sab karne main…inhe..

  2. Ye..sirf logo ko ulu bana ne ka kam kar rahe hain … privatisation kar ke in hone jobs khatam kar di hai ..or kah rahe hi ki berojgari kam hogi… lockdown ka bahut acha faida utha rahe hain…ajj toh privatisation hui hai …kal bade bade global leaders ko bula kar nilami bhi kar denge…or dekhte dekhte desh bech dalenge….baki jatibad toh chal hi raha hai…

  3. Macro economic policy should be one of stimulus as the economic sustaining power has already weakened due to inactivity during Covid-19 crisis.The health care expenditure and migrant labour
    support might mean more government expenditure and higher fiscal deficit more than what is presented here and govt.should draw out a programme of quantitative easing to absorb the expenditure.
    Sector wise specific reforms to economic viability as well as attract private or foreign inflows have to
    be devised.Power sector reforms a must and Agriculture investment and Govt programs can prove a boon thru greater crop production.Are land reforms still due for this sector?State governments have to work hand in hand with Delhi govt,to see thru the crisis.
    pharmaceutical sector can be new provider of income, Coal sector privatisation is a game changer.
    Banking sector reforms to monitor the quality of lending and essential credit growth are of utmost
    importance. Telecom sector reforms can produce revenue to govt, With proper initiative we can cross the
    bridge and economic management can result in people preferring a government that is responsive
    to people,s aspirations.

  4. No State owened PSU banks should be privatised. Out of 12 (twelve )state owened PSU banks after merger there should be only four state owened PSU banks.

  5. In banking sector, after merger of 10 State owened PSU banks. Now there are 12 state owened PSU banks. Government should merge remaining State owened PSU banks . Only there should be four state owened PSU banks. No PSU banks should be privatised. To avoid any frustratation amoung bank employees. Because all the employees are selected through tough competition. In my opinion no PSU bank should be privatised in future.

  6. In Bankig sector, After merger of 10 state owened PSU banks in April 2019,now there are 12 state owened PSU banks. Now remaining state owened PSU banks should be merged and only there should be four state owened PSU banks. Then these PSU banks can be run efficiently. In my opinion no state owened PSU banks should be privatised. Because all the employees working in these PSU banks are selected through though competition. No state owened PSU banks should be privatised . To avoid any frustratation among employees

  7. In defence, the private sector has already come up with their own products in the lower end of the defence sectors. Defence products which does require high capital investment like Helmets, Shells, Small arms , night vision goggles, Shells, have already been put up by the private sectors, and their products seem to be much better than OFB and BEL. Even the medium sectors like artillery guns has seen the emergence of the private sector like Bharat forge. So, the government should first leave these sectors, where significant competition exists locally in the form of private sector The high end sectors like aerospace would require the government’s participation at a higher scale. Government PSUs like HAL should be retained with the government, although HAL needs to be given a little bit of more autonomy, than it has right now. The private sector should be free to pursue their own development in aerospace , but I don’t think they are going to enter this ‘high investment and no guaranteed returns’ sector. So, the only option is to keep the government option open in the form of HAL for the foreseeable future. If we don’t, we’ll end up importing even light utility helicopters as well as trainer aircrafts from abroad.

  8. Please do not confuse or fool peoples with the words ‘Game Changer’.Now a days Modi Goverment is using the word ” Game Changer’ for everything. Please ask Modi Goverm,ent specific inputs or what and How and why of the policies and explain to the citizens.It is totally misleading to say Game Changer for everything and for every policy.The other day Modi Goverment announced a New education policy and called it a game changer,But whereas tamilnadu Goverment Rejected the new education policy in toto and said it refused to adopt centre’s new education policy as it was fatally flawed and saffron policy.

    • No they didn’t. They rejected 3 language formula. They will follow 2 language formula. Don’t be a blind hater of good policies because it is formulated by modi government.

  9. Points are valid. Unfortunately, electronic media has occupied disproportionate space through spicy and fleeting unconfirmed politically motivated propaganda.

LEAVE A REPLY

Please enter your comment!
Please enter your name here