The Union Cabinet meeting chaired by Prime Minister Narendra Modi recently gave in-principle approval to NITI Aayog's proposal for strategic sale of state-owned firms and entrusted DIPAM with the task of finalising the PSUs in which management control can be transferred to private players.
The Cabinet meeting, decided that the Department of Investment and Public Asset Management (DIPAM) would work out the broad methodology and valuation, thereafter fixing the base price for each of the PSU being put up for strategic sale. Briefing reporters after the meeting, Finance Minister Arun Jaitley said the names of PSUs that are up for strategic stake sale would be made public on a case-to-case basis once the Cabinet decide to put them up for the auction.
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, he said.
The government has Budgeted to raise Rs 20,500 crore via strategic stake sale of PSUs, but Jaitley said it would not rush to sell the companies in order to achieve the target.
At the moment we are at the mid-point of the year and this year we have already made a significant headway in disinvestment... I am not going to allow it (PSUs) to be under sold merely because there is a calendar limitation, he said.
Besides strategic sale, government plans to raise Rs 36,000 crore through PSU minority stake sale. It has already raised Rs 8,632 crore through share buyback and Offer for Sale
Jaitley said each PSU would be examined separately by DIPAM and the administrative ministry concerned and then a final view would be taken by the Cabinet on strategic sale.
Some of these are important units and therefore since each unit would be considered on its own merit, the timing of that would be decided by the government accordingly. There are settled valuation processes and a transparent one would be followed, he said, adding today's Cabinet did not discuss NITI Aayog's list of PSUs which could be closed down.
Jaitley further said the valuation of the PSUs up for strategic sale will also take into account immovable property and other assets.
NITI Aayog has prepared a list of public sector units where the government can sell its majority stake to private companies in order to bring in greater efficiency and professionalism in their functioning. The last strategic sale took place in Jessop and Co in 2003-04 under the NDA government headed by Prime Minister Atal Bihari Vajpayee, when 72 per cent of government stake was sold to Indo Wagon Engineering for Rs 18.18 crore.
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Incidentally, the first strategic sale in a PSU also happened under NDA rule in 1999-2000 when the government sold 74 per cent equity in Modern Food Industries to Hindustan Lever for Rs 105.45 crore. During 1999-2000 and 2003-04, the government had strategically divested stake in 16 PSUs, garnering Rs 6,344.35 crore. These included sale of fuel retailer IBP Ltd to state-owned Indian Oil Corp (IOC) for Rs 1,153.68 crore.
Indian Petrochemicals Corp Ltd (IPCL) was sold to Reliance Industries for Rs 1,490.84 crore, Videsh Sanchar Nigam Ltd to Tata Group firm for Rs 1,439.25 crore and Hindustan Zinc Ltd to Vedanta Group for a total consideration of Rs 768.88 crore.