Cabinet to clear stake sale in 20 PSUs Wednesday

UNION Cabinet is likely to clear the plan to reduce majority stake in around 20 PSUs on October 19 (Wednesday). These include many profit-making PSUs, signaling a restart of equity sale in public sector companies after a 12-year gap. There will also be a detailed review of the plan to shed 10 percent stake in public sector general insurance companies, a move aimed at helping the insurers raise funds to take on private sector players. "The aim of the policy is to ensure that these PSUs are run professionally and there is greater value in these entities, paving the way for the government to dilute its stake...
in the years ahead," a government source was quoted as telling a national daily.
The PSUs identified foo stake sale include Bharat Earth Movers, which is profitable, Certification Engineers International and others such as loss-making Scooters India.
NITI Aayog, the government think-tank that was tasked to frame disinvestment policy for the government, had recommended strategic sale in several PSUs that would result in bringing down the Centre's share in these entities to under 50 percent.
NITI Aayog has argued that this model will help optimize revenue, while focusing on strategic sectors such as oil or segments where the government wants to avoid a dominant role of the private sector. As a result, the move to shed stake in Container Corporation (Concor) where the government holds nearly 57 percent stake, through the "strategic sale" route was dropped. Concor controls nearly three-fourths of the market and is seen to be a vital link in the government's efforts to boost the logistics network. Similarly, Bhel is seen as another strategic company, although the government is not averse to selling stake in some of its arms.
The boost for disinvestment comes at a time when the government is looking to bolster its purse. Although it is comfortable at the moment, especially with flows from the Income Disclosure Scheme by end of the year, it may have to deal with a shortfall in revenue from spectrum auctions.
NDA government has decided to change the policy of disinvestment, which was confined to sale on stock exchanges during the UPA regime. It had recently cleared sale in loss-making Bharat Pumps & Compressors Ltd (BPCL). From a list of 74 loss-making companies identified by NITI Aayog, the government is looking to sell 22 companies, including BPCL, and is going to wind up several others.
In a related development, it was reported that employees of state-owned companies may set up trusts to pool resources and pick up stakes in these firms on the exchanges. This follows an informal missive from the government to public sector undertakings to form employee trusts and participate in the divestment drive. Recently, market regulator Securities and Exchange Board of India (Sebi) raised the limit for employees buying shares to Rs 5 lakh per individual from Rs 2 lakh
In the Union Budget for 2016-17, Finance Minister Arun Jaitley had said that the government aimed to raise Rs56,000 crore, which is 19 percent lower than the Rs69,500 crore the government had targeted in the last budget. Of this, Rs 36,000 crore is expected to come from minority stake sales and buybacks, while Rs 20,500 crore is likely to come from strategic sales in PSUs or their assets such as factories, warehouses and office buildings.