Is the govt going slow on privatisation?

After offloading Air India in October last year, the government has now kicked off the process to sell its stakes in its subsidiaries which were not part of the deal. Air India has four subsidiaries which are Air India Airport Services Ltd, or AIASL, Air India Engineering Services Ltd, or AIESL, Alliance Air Aviation Ltd, and Hotel Corporation of India Ltd. And, the process to offload AIASL and AIESL is on.

The government is also moving ahead with the privatisation of IDBI Bank. DIPAM Secretary Tuhin Kanta Pandey has confirmed it this month, saying that the department would soon invite preliminary bids. The government holds a 45.48 per cent stake in the bank, while the Life Insurance Corporation of India, which is the promoter of the bank, owns a 49.24 per cent stake.

The government will also reportedly invite financial bids for the privatisation of Bharat Earth Movers Limited in the December quarter.

But, notwithstanding these moves, the overall picture regarding the government's disinvestment plans looks gloomy. For the current financial year, the government has budgeted to raise 65,000 crore rupees from disinvestment. But, even as half of the fiscal year is over, it has raised only about 25,000 crore rupees so far.

Union Finance Minister Nirmala Sitharaman had proposed the privatisation of two public sector banks in her 2021-22 Budget Speech. But, the amendment to the banking laws, which would have enabled the government to offload its stakes, has not been passed so far. Also, a research paper in the August issue of the Reserve Bank of India Bulletin lauded the role of PSBs. It argued that “big-bang” PSB privatisation would not be a panacea. While clarifying later, the RBI said that a gradual approach, as announced by the Centre, would result in a better outcome.

Now, in September, Oil Minister Hardeep Singh Puri indicated that the much-delayed BPCL privatisation may not happen in the near future. Puri made it clear that there was “no proposal whatsoever” on his table for now. And earlier this year, the Centre had announced the sale of Pawan Hans to a consortium. But, the sale was scrapped later as questions of impropriety and non-payment of dues were raised about a company that was part of the consortium. The privatisation of Central Electronics Ltd may also be called off and that of the Container Corporation of India Ltd is yet to be initiated.

In May, the Cabinet Committee on Economic Affairs approved the sale of the government’s entire remaining stake in Hindustan Zinc Ltd, or HZL. The sale of the entire 29.5 per cent stake is estimated to fetch 38,062 crore rupees. But, this sale is also yet to go through and the government is in the process of appointing financial and legal advisors who will see it through to its conclusion. All of this has raised the question, is the government going slow on privatisation?

The prevailing investment and economic atmosphere may have made the government go slow on privatisation, but going ahead, every such decision will also have to face another headwind, the fast-approaching 2024 Lok Sabha elections. Privatisation has always been a politically-sensitive topic, and thus, there may be doubts about the government going in for any big-ticket privatisations, especially of the two PSBs, during the remainder of its term.