 "Jaitley likely to pare disinvestment target")
Finance Minister Arun Jaitley is likely to announce a relatively realistic disinvestment target of Rs 50,000-55,000 crore in the Union Budget for 2016-17, much lower than the current financial year's target of Rs 69,500 crore.
However, at least half of that amount - Rs 25,000-30,000 crore - could be the target for sale of the Centre's stake in loss-making state-owned companies.
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The Prime Minister Narendra Modi-led government is expected to provide a major push to strategic stake sales of loss-making public-sector undertakings (PSUs) next year.
Business Standard has learnt that a policy note on the proposed mechanism for strategic stake sale, being circulated among government departments is likely to be made public soon. Sources said it could be released even before the Budget.
The policy framework for strategic sale or revival of "sick PSUs" includes the formation of a body similar to the erstwhile Disinvestment Commission, led by the Cabinet secretary. It could be tasked with deciding whether a "sick PSU" can be revived by ceding a part of the stake and control to private sector investors, or if it needs to be divested forthwith.
"The Centre had an ambitious target for strategic divestment in the current financial year. For a number of reasons, that will not be fulfilled. However, the policy framework is all but ready and will be released soon. There are big concrete plans for strategic sales in the next financial year," said a senior government officer aware of the developments.
For the year ending March 31, 2016, the budgeted disinvestment target is Rs 69,500 crore, of which Rs 41,000 crore was expected from five to 15 per cent stake sale in profitable, listed PSUs and Rs 28,500 crore from strategic stake sale of sick state-owned companies.
However, the volatile market conditions have put a wet blanket on the prospect of actual figures coming anywhere close to those numbers.
So far, the disinvestment department has raked in nearly Rs 13,340 crore from stake sales in Indian Oil, Dredging Corporation of India, Power Finance Corporation, Rural Electrification Corporation, and Engineers India Ltd through the offer-for-sale route.
The revised disinvestment estimates for the year are likely to be closer to Rs 30,000 crore, another official said.
It is understood that because of continued volatility in the equity markets, and as most of the other companies up for minority stake sale are commodity and oil stocks, like Coal India, Nalco, MMTC, Oil India and ONGC, the Centre has reportedly asked PSUs to buy-back shares to make up for any shortfall.
According the new strategic-sale mechanism, which will need Cabinet approval, the yet to be formed body will aim to bypass bureaucratic hurdles associated with decisions regarding complete or part exit of the government from a company. It will also comprise the secretaries of disinvestment, public enterprises and economic affairs, and the secretary of the line ministry whose company is up for complete or part divestment. The body will be tasked with carrying out strategic sales in a time-bound manner
In the case of non-listed distressed PSUs, the commission might decide on piecemeal asset sale of factories, office space, warehouses, land parcels and other facilities.
In the last Budget session, Heavy Industries Minister Anant Geete had laid in Parliament a list of 65 loss-making state-run companies, including Air India, Fertiliser Corporation of India, Hindustan Shipyard, HMT, Mahanagar Telephone Nigam, Bharat Coking Coal, ITI and Scooters India, among others.
Apart from deciding whether or not a financially distressed PSU needs to be sold, the panel of secretaries is also likely to decide on the method of selling. In case of listed companies, selling part or full stake might be decided upon.
If the panel decides an unlisted entity needs to be divested forthwith, monetising its various assets could be the preferable route. In fact, as a run-up to the policy note, Cabinet Secretary Pradeep Kumar Sinha had held meetings with various ministries and departments to discuss distressed PSUs under their domain. These meetings were held in the last quarter.
The Narendra Modi-led government is reviving strategic sales after the previous National Democratic Alliance government, led by Atal Behari Vajpayee, raised around Rs 6,000 crore by selling loss-making PSUs and exiting certain sectors. There were no strategic sales under the 10 years of the United Progressive Alliance government.
