New Delhi, Aug 10 (IANS): The Modi government's disinvestment policy, focused on strategic sales, has gathered steam in the past one year, with even profit-making PSUs such as BPCL being put on the block. This spree of putting state-run entities up for sale is a sort of a 'deja vu' moment for Indian public sector enterprises, which witnessed a similar privatisation drive during the Atal Bihari Vajpayee-led NDA government.
In less than two and a half years of forming the government in 1999, the NDA government sold controlling stakes and transferred management rights in nine profit-making and asset-rich public sector enterprises. With Arun Shourie as Disinvestment Minister, the government sold off major PSUs, including BALCO, IPCL, VSNL and Hindustan Zinc.
Similarly, the current NDA government also plans to sell its stake in major PSUs, including Air India, BPCL, CONCOR, and the SCI. Further, in its new Public Sector Enterprise Policy, the government plans to privatise all the PSUs in non-strategic areas while retaining its presence in strategic sectors.
People in the know also said that banking and insurance companies in the public sector may also be up for sale this time round, though this has again drawn criticism from several quarters.
A major similarity between the disinvestment drives of both the NDA governments (Vajpayee vs Modi) is that both have had to deal with stress in their exchequer and the current government also is pinning its hopes on the strategic sales to shore up its revenues and meet the expenditure targets that have risen in wave of the Covid-19 pandemic.
In the Union Budget for FY21, the government had set a disinvestment target of Rs 2.1 lakh crore. The target was, however, described as ambitious by many, as the Centre didn't reach anywhere near it in the last fiscal. Even this year, the progress of disinvestment is sluggish and all hopes lie on BPCL privatisation to inch anywhere close to the targeted disinvestment proceeds.
And just as the privatisation policy of the then NDA government drew a lot of flak for allegedly selling public assets for a song, the recent privatisation drive with BPCL in the limelight is also drawing criticism from several quarters, including employees unions.
Employees of BPCL, under the banner of All India Coordination Committee of BPCL Workers, have opposed the privatisation move along with the voluntary retirement scheme the company has come up with for employees above 45 years of age.
Several experts also have weighed in against giving away majority stake in the third-largest oil refiner and second-biggest fuel retailer in the country to private entities. A better idea, they have suggested, is to merge the company with other oil PSUs to make it grow in scale and derive even higher value for the government.
Speaking to IANS, former bureaucrat B.K. Chaturvedi maintained that the government should desist from selling majority stake in profit-making companies and sell only some of the stake in those companies, if required.
He noted that the government should look at resources to raise revenue to meet their expenditure needs, but privatisation should not be the only focus.
"I feel that the government should not go ahead with sale of profit-making companies... BPCL and most of the oil companies are doing very well. If they have to do (a sale), part of the shares can be sold, not a majority stake," the former Cabinet Secretary and Planning Commission member said.
Chaturvedi also raised doubts over the possibility of raising large sums of money from a privatisation drive in the current economic scenario and stressed on other avenues to increase revenue, such as plugging leakages in GST.
"Government has to muster up resources. They have to look at other resources... many of the disinvestments they do, may not fetch them a very good price."
The planned strategic sale of 52.98 per cent stake in BPCL has so far has been slow in terms of progress and the timeline of submitting of Expressions of Interest (EoI) has been deferred for the third time till September 30. Doubts are now being raised whether the exercise would be completed this year. But if under pressure, undue haste is shown by the government, it could end up committing the same mistakes, that many say, were committed during Vajpayee's time.
The first strategic sale, nearly two decades ago, resulted in the Vajpayee government selling 51 per cent controlling stake in Balco to Anil Agarwal's Vedanta Group for Rs 551 crore. With this meagre investment, Vedanta Group got control over assets that were worth several times more.
Similarly, the group also took control of Hindustan Zinc by buying 26 per cent controlling stake in this metals major for Rs 445 crore. The present market capitalisation of Hindustan Zinc is around Rs 85,000 crore, meaning that the government's 45 per cent stake is now worth approximately Rs 40,000 crore, 50 times higher than the sale price.
The cases of undervalued sale were also seen in the case where 26 per cent controlling stake in IPCL was sold to Reliance Industries Ltd (RIL) for a consideration of Rs 1,491 crore and Tata Group picking telecom PSU VSNL and software PSU CMC at a much softer selling price.
"The fear is that the mistakes of the past are not repeated now. Though market dynamics are different now and valuations would be done on international principles, the current oil market and general economic conditions should not result in a distress sale for BPCL, which otherwise is a company that possesses enormous value," an analyst with one of the top four global audit and consultancy firms, who asked not to be named, said.
The pandemic and its economic impact has, however, put brakes on the government's disinvestment plans. Secretary, Department of Investment and Public Asset Management (DIPAM), Tuhin Kanta Pandey recently said that disinvestment plans have been impacted by the ongoing Covid-19 crisis, making it necessary to extend to some extent the timelines for the submission of EoIs.