Private sector's efficiency to unlock value of firms being privatised: FM

Finance Minister Nirmala Sitharaman on Monday said efficient management and use of the latest technology by the private sector will help unlock the real value of CPSEs undergoing strategic sale and bring much higher dividends for the economy.

She said Niti Aayog had been mandated to identify and recommend CPSEs -- which are not in the 'priority sector' -- for strategic disinvestment, based on the criteria of national security, sovereign functions at arm's length, and market imperfections and public purpose.

These CPSEs are reckoned as 'low priority' for the government notwithstanding that they may be profit-making companies.

"The unlocking of real value through better/ efficient management and use of latest technology by the private sector may bring much higher dividends for the economy as a whole in terms of growth, productivity and employment," Sitharaman said in the Lok Sabha.

She was replying to a question on the objective and reason for which the government proposes to disinvest its stakes in the Shipping Corporation of India (SCI), which has been earning profit.

To another query on whether the government is aware of the protests and opposition to the disinvestment decision, the minister said, "Representations have been received from the staff union and officers' association of the company to reconsider the decision. Government intends to proceed with the decision taken by the CCEA".

Based on the recommendations of Niti Aayog, Cabinet Committee on Economic Affairs (CCEA) had on November 20, 2019, accorded in-principle approval for strategic disinvestment of government's shareholding of 63.75 per cent in the SCI, along with transfer of management control to a strategic buyer. The Preliminary Information Memorandum/Expression of Interest (PIM/EoI) was floated on December 22, 2020.

"In response to PIM, multiple EoIs have been received. In the second stage of transaction, after due diligence by Qualified Interested Bidders (QIBs), Request for Proposal (RFP) would be supplied to QIBs for submission of financial bids," Sitharaman said.

She said strategic disinvestment is guided by the basic economic principle that the government should discontinue its engagement in manufacturing/ producing goods and services in sectors, where the competitive markets have come of age, and such entities would most likely perform better in the private hands.

The government has budgeted to raise Rs 1.75 lakh crore in the next fiscal beginning April 1 from the CPSE share sale, including strategic disinvestment and minority stake sale.

In the current fiscal till March 9, it has realised disinvestment receipt of Rs 21,303 crore, which is around 67 per cent of Revised Estimate (RE) in 2020-21.

To a separate question on whether some PSUs are incurring losses, Sitharaman said as per the Department of Public Enterprises, 84 Central Public Sector Enterprises (CPSEs), including parent companies and subsidiaries, have incurred losses during 2019-20.

"The reasons for losses/sickness in CPSEs vary from enterprise to enterprise.

"However, some common problems for loss/sickness in CPSEs include lack of adequate capital, obsolete plant and machinery, outdated technology, low capacity utilisation, low productivity, poor debt-equity structure, excess manpower, weak marketing strategies, inability to face market competition, lack of innovation, and excessive dependence on Government orders," she said.

The minister said the major factors for losses incurred by Rashtriya Ispat Nigam Ltd (RINL) are higher direct and indirect costs, high debt servicing, lower productivity, and lower capacity utilisation.

The CCEA on January 27 had given in-principle approval for 100 per cent disinvestment of government shareholding in RINL, along with its stake in its subsidiaries/joint ventures through strategic disinvestment by way of privatisation.