Expedient exit: On PSU disinvestment

Disinvestment can only be a stopgap measure in plugging the gaping fiscal hole

November 22, 2019 12:02 am | Updated 10:02 am IST

The Cabinet’s latest decision to approve strategic disinvestment of the government’s shareholding in five public sector enterprises including Bharat Petroleum Corporation Limited, Shipping Corporation of India and the Container Corporation of India can at best be described as an expedient exit. Faced with a massive shortfall in revenue and capital receipts — as of September 30, net tax revenue had only reached 36.8% of the budget estimate of ₹16.5 lakh crore for the full year, while non-debt capital receipts were at 17.2% of the fiscal’s target of about ₹1.2 lakh crore according to the Controller General of Accounts — the share sale is aimed at helping the government narrow the yawning fiscal gap. Finance Minister Nirmala Sitharaman had made clear in July’s Budget speech that select and strategic disinvestment would “remain a priority” and the Cabinet’s decision to sell the Centre’s entire 53.29% ownership in BPCL, all of its 63.75% holding in SCI and 30.8% of its stake in CONCOR is an attempt at ensuring the actualisation of this policy approach. Still, the underlying rationale behind this government’s disinvestment programme remains hazy. It would be perfectly understandable if the aim was to exit unprofitable, non-strategic businesses. BPCL, however, is a profitable refiner and oil marketing company that has consistently paid a healthy dividend. It has also made investments in upstream energy resources and holds interests in overseas hydrocarbon blocks. To that extent, a full sale now deprives the government of all upside potential.

While the BPCL stake could fetch the exchequer about ₹59,000 crore based on Thursday’s closing price on the BSE, the Cabinet’s decision to carve out and exclude the company’s 62% holding in Assam’s 3-million metric tonnes per annum Numaligarh refinery would surely pare the price it could get from a prospective buyer. And the lack of an explanation for the logic behind the move also hints at politics taking precedence over any economic interest, especially given the ruling party’s keenness to strengthen its newfound sway in the restive northeastern States. With just a little over four months left in the financial year, how the government intends to actually complete the transaction — from appointment of advisers, to deciding on the pricing mechanism and initiating a transparent bidding process before finalising a buyer — this fiscal is another big question. While the transfer of the government’s stakes in THDC India Limited and North Eastern Electric Power Corporation to the captive buyer, state-owned NTPC, will obviously go through in time, it is the market sale of the bigger-ticket stakes that could pose a challenge. With just ₹17,364 crore of the ₹1.05 lakh crore disinvestment target realised so far, the Centre has little choice but to expedite these strategic sale proposals in double-quick time.

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