The government will adopt a ‘squeaky clean process’ for the privatisation of public sector enterprises as per the new policy unveiled in the Budget, said Tuhin Kanta Pandey, the top Finance Ministry official entrusted with steering the disinvestment process.
“For the first time after 2004, you will have a set of privatisations starting with Air India and BPCL as the large ones… We are very clear this has to be squeaky clean process so that no one can question its credibility,” Mr. Pandey told The Hindu on the execution plan for the disinvestment policy that envisages the government exiting a large chunk of the 439 central public sector enterprises (PSEs) in the country.
“We want it to be absolutely squeaky clean and for that, even I won’t know the names of the bidders. We won’t even fix the reserve value till the time financial bids are locked. If someone gets some information on the reserve price somehow, it would make it an unfair advantage for that bidder,” said Mr. Pandey, who is the Secretary for the Department of Investment and Public Asset Management (DIPAM).
Some of the strategic sales of public sector enterprises, sold in the early 2000s during the Atal Bihari Vajpayee administration, had faced post-deal scrutiny from investigative agencies and auditors for several years.
In September last year, a special CBI court had asked the agency to file criminal cases against former Union minister Arun Shourie and former Disinvestment Secretary over the sale of a luxury public sector hotel in 2002.
“We are saying let’s do it in such a manner so that any entity that looks at it says that there cannot be a better process in the world than this. When we are inviting global investors, they won’t come if they feel there’s something wishy-washy here,” Mr. Pandey said.
“We want wholehearted bids, with whoever is willing to pay more winning. Our focus is maximisation and we are not keeping too many entry barriers, including technical criteria, as it creates a problem if you say only a particular industry player can come. That will restrict value and allow existing groups to dominate. That’s not how it works anymore as companies with capital can hire professional experts and CEOs,” he pointed out.
“Capitalism is full of upsets and such upsets should occur here too,” he underlined.
The new disinvestment policy goes further than the past case-by-case approach, and straightaway allows the sale or closure of nearly 151 PSUs (83 holding companies and 68 subsidiaries) in non-strategic sectors, he said. It also covers banks and insurers for the first time, with two public sector banks and one general insurer proposed to be sold in 2021-22.
“Some of them will be closed if nobody’s interested in them. If they can’t fend for themselves, then I think they might as well close. Certainly, the government is not supporting them anymore,” he said, citing the decision to close Scooters India after no one evinced interest in buying it. “We can’t say there is a queue of investors waiting for every PSU. We have to work very hard to sell it off.”
In the four sectors identified as strategic, ‘bare minimum’ entities will be retained, which could mean one, two or three firms, said Mr. Pandey. There are 77 ‘parent’ companies (with multiple subsidiaries) in the strategic sectors.
What constitutes bare minimum in different sectors and whether some entities should be considered for privatisation or closure, will be decided through a process initiated by the Niti Aayog, that will be reviewed by a core group of Secretaries on disinvestment, followed by a Ministerial group comprising the Finance Minister, the Road Transport and Highways Minister and the Minister under whose domain the PSE falls.
An existing independent external monitoring body for overseeing disinvestment, chaired by former Supreme Court Chief Justice R.C. Lahoti, will continue to guide officials on key issues in the disinvestment process such as valuation principles, but won’t oversee the individual transactions.
“Once they okay the principles, they won’t change all the time. It gives a comfort level once they vet the rules we frame. After sharing with them, we believe we are on the right track,” the DIPAM Secretary said.