The government’s strategic sale plan could face headwinds with some administrative ministries insisting on stringent conditions on foreign investment for the sale of state-run companies under their watch.
In some cases, the administrative ministries insist that strategic equity stakes must not be sold to foreign investors, including institutional investors, said two government officials aware of the deliberations.
In others, they want a cooling-off period of a few years after a strategic sale before allowing foreign investment. Companies identified for strategic sales include Pawan Hans Ltd., BEMLBSE 0.89 %, Dredging Corporation of India LtdBSE 1.16 %. and Bharat Pumps & Compressors Ltd.
A disinvestment target of Rs 72,500 crore has been set for the next financial year, of which Rs 15,000 crore is expected from strategic sales. The target through such stake sales in the current financial year was budgeted at Rs 28,000 crore, although the government hasn’t been able to move forward on this.
Another government official said that such norms may throw a spanner in the works, especially in the outright sale of companies in which foreign participants may be willing to buy stakes. The involvement of foreign investors could also fetch better valuations.
“These conditions are irrational and may delay the stake sale process. The finance ministry is now expected to hold wider consultations with all stakeholders,” the official said.
Experts said this is a retrograde move when the government is looking to attract more foreign direct investment and has scrapped the Foreign Investment Promotion Board.
“They should also consider that banks in India are grappling with bad loans and will not be able to finance Indian promoters, who are already having problems servicing their debt,” said Prithvi Haldea, chairman of Prime Database.
At a recent meeting between officials of the finance ministry and those from other administrative ministries, it was decided to set up a disinvestment cell within central public sector enterprises and their respective administrative ministries to fast-track the process.
The government intends to sell its entire 51% stake in Pawan Hans, 26% stake in BEML and more than 51% in Dredging CorporationBSE 1.21 %. The government will completely exit from Bridge & Roof Company and Hindustan Fluorocarbons.
