Cabinet clears ‘strategic sale’ of some PSUs

For the first time since the Atal Behari Vajpayee government of over a decade ago, India will undertake the strategic sale of state-owned firms. The Union Cabinet, at its meeting Thursday chaired by Prime Minister Narendra Modi, granted in-principle approval to the Niti Aayog’s proposal for the strategic stake sale in over a dozen public sector undertakings (PSUs), including some which are making profits.

The government will give up management control in these PSUs as the Centre plans to bring its stake in these firms to under 50 per cent. The PSUs listed for a strategic sale will be decided on a case-by-case basis.

The Cabinet also approved the closure of the loss-making HMT tractor division by offering VRS to its employees at the 2007 notional payscales.

“The recommendations of the Niti Aayog with regard to both disinvestment and strategic sale came up for consideration. In principle, the Cabinet has approved the recommendations with regard to some of the units,” said Union finance minister Arun Jaitley. He said the names of PSUs that will be up for strategic stake sale will be made public once they are to be put up for auction.

“Some of these are important units and therefore, since each unit will be considered in its own merit, the timing of that would be decided by the government accordingly,” Mr Jaitley said. While evaluating the valuation of these companies, the government will also take into account its immovable property and other assets. Mr Jaitley said that to arrive at a valuation of these PSUs, the government would follow settled, transparent valuation processes.

The PSUs listed for strategic sale will be considered by the Cabinet separately after it had been examined by the department of disinvestment and the relevant ministries.

The department of investment and public asset management will work out the methodology, price fixation and base price for each PSU that is up for strategic sale.

“So in principle it has been approved. Specific cases will now come up after a detailed examination on how it is to be done in each case, and details with regard to the units concerned will be furnished at that stage. This list does not include PSUs for closure,” he said. On the timeline for sale, the finance minister said he was not going to allow it to “be under-sold merely because there is a calendar limitation”.

Asked whether the government will meet the Rs 20,500-crore strategic stake sale target for the current fiscal, Mr Jaitley said “at the moment we are at the mid-point of the year, and this year we have already made a significant headway”. The government has already raised over Rs 8,000 crores through PSU share buybacks and OFS (offer for sale). It intends to raise Rs 36,000 crores in the entire fiscal through minority stake sale in PSUs.

The PSUs identified for strategic sale by the Niti Aayog reportedly include the profit-making Bharat Earth Movers and Certification Engineers International as well as loss-making Scooters India.

The last strategic sale of a PSU was Jessop and Co in 2003-04 under the NDA government headed by Atal Behari Vajpayee, when 72 per cent of the government’s stake was sold to Indo Wagon Engineering for `18.18 crores. During 1999-2000 and 2003-04, the NDA government had strategically divested its stake in 16 PSUs, garnering Rs 6,344.35 crores.

The first strategic sale in a PSU also took place under the Vajpayee government in 1999-2000, when it sold 74 per cent equity in Modern Food Industries to Hindustan Lever for Rs 105.45 crores.

The Union Cabinet on Thursday also approved budgetary support to HMT for payment of outstanding salaries and other employee dues. The Cabinet also gave its approval for the transfer of selected small parcels of HMT land in Bengaluru and Kochi to different government entities for their use in the larger public interest.