Ministry of Finance, New Delhi. | Photo credit: PTI
The Ministry of Finance will go ahead with the already announced and planned privatization of public enterprises in the next financial year, and the chances of a new addition to this list of CPSEs in the budget for 2023-24 are unlikely, have said. indicated sources.
The divestment target outlined in the budget for next fiscal year will likely be reduced and realistic, as the budgeted PSU sales target will not be met for the fourth consecutive year in this fiscal year.
In the current financial year, the government had planned to raise ₹65,000 crore through divestment. However, so far he has only made ₹31,106 crore from selling minority stakes in public sector companies.
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After tasting the success of the privatization of loss-making Air India in 2021, the progress of the sale of PSU has not been very impressive over the past year, and experts say that with the impending general elections in 2024, no major divestment announcements are expected. in this budget either.
“The plan is to move forward with the strategic sale of businesses for which Cabinet approval is already in place,” an official said. PTI.
This means that the government will go ahead with the privatization of companies like Shipping Corporation of India, NMDC Steel Ltd, BEML, HLL Lifecare, Container Corporation of India and RINL or Vizag Steel, as well as the big bank IDBI.
Considering that a strategic sale or privatization takes at least a year, and in some cases even longer, to complete, a high-budget divestment goal may not be achievable.
Nangia Andersen LLP, Partner-Government and Public Sector Advisory, Suraj Nangia said: “The privatization process often takes time, depending on the type of privatization and the economic, social and political context, underlining the importance of a plan to medium term, a sound regulatory framework and competitive markets”.
“A multi-year strategic plan for privatization can be formulated to ensure that there is a concrete timetable and a well-designed sequencing and strategy for privatization,” Mr. Nangia said.
EY India Associate Partner, Fiscal and Economic Policy Group, Rajnish Gupta said the privatization program may see a spike after the 2024 general election.
“Perhaps this year’s budget will be a bit muted and we may see announcements regarding divestment and the sale of minority stakes. After 2024, we may see an acceleration of the privatization program again,” Mr. Gupta said.
Over the past year, the government had canceled some strategic sales, including BPCL, due to lack of investor interest. Experts believe the private sector will be more inclined to buy state-owned companies if their deal is sweetened with tax incentives and regulatory exemptions.
Mr. Nangia said private sector participation is more likely to succeed when the required information is accurate, such as operational performance, asset condition, etc.
“An important factor considered by investors when deciding to bid on a privatization program is a ‘predictable regulatory environment and the absence of undue administrative barriers to business in general’. Other factors relevant include sufficient and accessible resources, including the presence of appropriate infrastructure and human capital, tax incentives, financial subsidies and regulatory exemptions,” Mr. Nangia added.
