Cabinet gives in-principle nod to biggest divestment drive

The Union Cabinet, led by Prime Minister Narendra Modi, on Thursday gave an "in-principle" approval to strategic sales and disinvestment in a number of state-owned companies, kick-starting the process of valuing these entities and finding interested buyers. The public sector undertakings (PSUs) include loss-making and profit-making entities as well as assets such as factories and plants. Finance Minister Arun

Jaitley announced the decision during a media briefing after the Cabinet meeting. He, however, declined to reveal the names of the companies, saying these will now be approved by the Cabinet on a case-by-case basis after valuing them, finding prospective buyers and possible methods of sale.

"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," Jaitley said.

"Specific cases would now come up after a detailed examination as to how it is to be done in each case and the details with regard to the units concerned will be furnished at that stage. This list does not include PSUs for closure," he said.

A senior government official said later that the Department of Investment and Public Asset Management (DIPAM), along with the line ministries, will now begin the process of valuing these companies, finding a market and prospective buyers as well as the method of selling these companies.

Once these processes are completed, the Cabinet will be approached again for a final approval, the person said. Dipam is said to be considering at least five different methods, including relative peer review and discounted cash flow, for valuing the PSUs.

As reported earlier in Business Standard, two lists are said to have been prepared by the NITI Aayog. One on companies where government ownership will be given up and shareholding will be brought to below 50 per cent at one go. The other on companies in which shareholding will be brought down to 51 per cent or above.

Some possible names of entities for which approvals could have been sought include Pawan Hans, Bridge and Roof Co, BEML, Scooters India, Hindustan Prefab and Central Electronics. Approvals may also have been sought for selling some units of Steel Authority of India and NMDC.

Cabinet gives in-principle nod to biggest divestment drive "Some of these are important units and since each unit would be considered in its own merit, the timing of that would be decided by the government accordingly," Jaitley said.

He added that the valuation will also take into account immovable property and other assets.

"I am not going to allow it to be under sold merely because there is a calendar limitation," he said, when asked about the timeline for sale.

Asked whether the government will be able to meet the Rs 20,500-crore strategic stake sale target for current financial year, he said, "at the moment we are at the mid-point of the year and this year we have already made significant headway". The government's disinvestment target for the current financial year is Rs 56,500 crore. Of this, Rs 36,000 crore is expected from minority stake sales and buybacks. The rest is expected from strategic sales in loss-making or profit-making PSUs or their assets (factories, warehouses, and office buildings). The government has managed Rs 21,000 crore through stake sales and buybacks in the first six months, the highest-ever first half divestment revenue for any year by a good margin, raising expectations for the rest of FY17. Of this, Rs 16,500 crore is from buybacks initiated by five PSUs. The rest is from five stake sales through the offer-for-sale route.