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CPSE divestment target: How is government chasing the magic number?

In order to meet its divestment target, the government has planned a number of mergers, acquisitions and share buybacks to bridge its fiscal deficit

CPSE divestment target: How is government chasing the magic number?
CPSE divestment target: How is government chasing the magic number?

New Delhi: While chasing the magical number of Rs 80,000 crores, the government is looking at an array of options — a series of mergers and acquisitions by public sector undertakings (PSUs) of other PSUs, selling stakes to state-owned ETFs as well as share buybacks — to meet its divestment target. While the plan was to raise around Rs 80,000 crore through disinvestment this year, it has till now raised a mere Rs 9,600 crore.

Shaky market dampened govt plans

A shaky market has off late dampened a number of Initial Public Offerings (IPOs) planned by the government and therefore, it has now decided to push for acquisitions of these ailing companies by other companies in the public sector, share buybacks and through another ETF.

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Sucking cash out of rich PSUs

As per the government plan, 64 percent of the stake in power firm SJVN will be sold to NTPC Limited. On the other hand, 65 percent equity in Power Finance Corporation will be sold to Rural Electrification Corp Limited. The finance ministry has also identified a dozen PSUs — NTPC, NBCC, Kudremukh, Neyveli Lignite, NMDC, Nalco and Coal India — to buy back their shares using up reserves. The boards of three PSUs — NALCO, NLC and Cochin Shipyard — have already approved share buybacks together worth Rs 2,000 crore. The government’s decision to make cash-rich PSUs buy stakes in ailing public sector companies has received a lot of flak from within the sector as many PSUs have protested against the move, contending that it will deplete their own reserves. One such recent acquisition of the government’s stake in HPCL by ONGC has come under intense fire from the Opposition Congress, which has accused the Centre of turning a cash-rich cow into a debt-ridden liability.

Making the most out of PSUs

Even though the planned disinvestment of national carrier Air India may have been shelved for now keeping in view the upcoming General Elections, a few strategic sales of insignificant PSUs is unlikely to fetch a lot of money, sources have said. Apart from strategic sales, the government is also planning to hive off land and other assets of these sick PSUs to raise money. It is also planning another exchange-traded fund which may sell abroad by issuing GDRs in the London market.

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