Divestment in railway public sector undertakings not in near future

Govt's disinvestment target for 2016-17 was Rs 56,500 cr, Rs 36,000 cr through stake sale in PSUs

Divestment in railway public sector undertakings (PSUs) is not likely in the near future.

According to sources, future divestments on railway subsidiaries will depend on a decision by the Union Cabinet on the plan to set up a holding company for all central public sector enterprises under the Suresh Prabhu-led ministry.

The Cabinet is likely to take a call on this decision by the end of this month.

According to sources, the earlier plan for a strategic sale in Container Corporation of India (Concor), which would have led to the privatisation of the railway entity, is temporarily on hold due to the current market situation and also for the decision referred to.

"The idea for a strategic sale is in place and we are waiting for the right time," Railway Board Chairman A K Mittal said.

In the proposal before the Cabinet, the holding company will have all other entities except Indian Railway Finance Corporation. The Railway Board chairman will be the chairman and managing director of the mega company.

The government's total disinvestment target for 2016-17 was Rs 56,500 crore, of which Rs 36,000 crore was to be through minority stake sale in PSUs and Rs 20,500 crore from the strategic sale. It has Rs 34,800 crore from sale of minority stake in this financial year.

Concor is a profit-making entity and the government has 56.79 per cent stake in it. An official source said: "There are two ideas we are having. One is a strategic sale of 10 per cent, through which the company might lose its PSU tag. The government also has the plan to go for a minority stake sale of five per cent. If market conditions are ideal, the government might think about this."

Concor had Rs 787 crore net profit in 2015-16. Early this year, the government divested five per cent stake in Concor at Rs 1,195 a share, fetching Rs 1,155 crore.

Divesting stake in unlisted railway public sector behemoths IRCTC, Ircon, RITES, etc, would unlock a lot of potentials and be a needed source of revenue for the government. For the proposal to merge rail subsidiaries, the ministry has got responses from other ministries and departments for the Cabinet note it had floated in this regard.

Asked why a profit making company like Concor is being considered for a strategic sale, a senior official said: "Railway companies like Ircon and Rites are strategically important for India as a country and so the government might not be keen on losing them. On the other hand, in the container space, there are 13 other operators, though Concor has 72 per cent market share. Hence, it does not make any difference even if Concor loses its PSU tag."