In an interview with Dipak Mondal and Monika Yadav, Tuhin Kanta Pandey, secretary of Department of Investment and Public Asset Management (DIPAM), shares insights into the government’s strategy regarding disinvestment and privatisation of Public Sector Undertakings (PSUs).
Government’s Stand on Disinvestment and Privatisation
Change in Stand Over the Past Three-Four Years
Pandey explains that disinvestment should be viewed in the context of overall public asset management. The government recognizes the need to manage public assets in a manner that aligns with its diverse goals and objectives. Different perspectives exist within public asset management, including disinvestment through equity and strategic disinvestment. These goals sometimes complement each other and at other times, they conflict.
Balancing Exercise for the Government
Pandey emphasizes that public sector asset management is not focused solely on achieving one target. It involves a balancing exercise for the government to address various perspectives and objectives.
Lowering the Disinvestment Target
Rationale Behind Lowering the Target
Pandey justifies the decision to lower the disinvestment target by highlighting that the actual proceeds from disinvestment will only be realized when the PSU is transferred to another company. It is not meaningful to set ambitious annual targets if the transactions cannot be concluded. Considering the government’s overall budget and fiscal deficit, the significance of the proceeds from privatisation may be relatively small.
Diluting Stakes in Large PSUs
Possibility of Diluting Stakes Below 51%
Pandey responds to the finance minister’s statement about potentially diluting stakes in some large PSUs below the 51% mark. While acknowledging the possibility in principle, he highlights the need to carefully study the implications. Liquidity-wise, a 49% stake may be sufficient, but the impact on resources and bondholders’ preferences should also be considered. The government’s stake going below 51% may have contractual implications and is not a straightforward decision.
Progress on Privatisation
Learning and Facing Bottlenecks
Pandey admits that the government is learning from its experiences with privatisation. While solutions are being sought, bottlenecks are also being encountered. The complexities of M&A transactions involving government enterprises are becoming apparent. Some tasks that the private sector can easily handle pose challenges for the government. For instance, dealing with non-core assets requires careful consideration due to valuation concerns and potential criticism regarding the pricing of sold assets.
Challenges with Non-Core Assets and Demerger
Pandey cites examples such as the Air India Building and Vasant Vihar Houses, explaining that addressing non-core assets is essential but not straightforward. The government must ensure fair valuations and smooth transactions. Additionally, demerging non-core assets from listed PSUs presents a unique process that must be navigated.
Documenting Land Deeds and Addressing Ownership Issues
Pandey highlights the documentation issues faced by PSUs like BEML, which lack proper land deeds despite being located in Mysore for 30 years. Completing the documentation is crucial as potential buyers require proper documentation before acquiring a company.
Time-Consuming Nature of Strategic Disinvestment
Pandey emphasizes that strategic disinvestment transactions are complex and time-consuming, involving multiple issues that need to be addressed.
