Govt wants to make the PSU sector leaner. So, what exactly is it planning to do?

New Delhi: As the government seeks to restructure public sector undertakings (PSUs), the bifurcation of Gas Authority of India Limited (GAIL) and a three-way merger of power generation companies NTPC, SJVN and NHPC seem to be on the anvil, sources aware of the development said. “We are looking at various combinations,” said a finance ministry official.

IOC interested in GAIL

According to sources, the government has been planning to bifurcate GAIL’s transportation and marketing arms. It must be noted that Indian Oil Corporation (IOC), the state-owned oil marketing company, had shown interest in natural gas processing and distribution company GAIL last year and hence could emerge as a potential buyer. IOC is the second-biggest gas marketer in India after GAIL. The government holds 52.64 percent in GAIL, which has a market capitalisation of Rs 80,844 crore.

Govt could raise Rs 30,000 cr from the sale

“In the past, the petroleum ministry had some reservations… we expect to iron out these issues this time,” the official said. If the deal happens, it will fetch the government Rs 30,000 crores at least.

The three-way merger

The other plan that is being considered by the government is the three-way merger of NTPC, NHPC and SJVN. The source said that one of the options to do this would be to let NHPC buy the government stake in SJVN and at a later stage become a holding company for both the utilities. The government’s 61.93 percent in SJVN is valued at about Rs 6,000 crore at current market price. The Centre holds 73.33 percent in NHPC, which has a market capitalisation of Rs 25,597 crores. Another alternative would be to let NTPC buy the government stakes in SJVN and NHPC would take over North Eastern Electric Power Corporation, making the merged entity a behemoth of hydropower firms.

Proposals likely to be taken up by new ministerial committee

While noting that these were the proposals being considered, the source said that they will be taken up by the new ministerial committee that will oversee mergers and strategic sales once the panel is notified.