Although the names of two public sector banks (PSBs) and one general insurance company to be privatised have yet to be determined, Tuhin Kanta Pandey, Secretary of the Department of Investment and Public Asset Management, or DIPAM, told Moneycontrol on February 2 that simply announcing that state-run banks are up for privatisation was a major declaration of intent in and of itself.
Pandey said the coming year’s divestment goal of Rs 1.75 lakh crore is focused primarily on privatization plans of Bharat Petroleum Corporation Ltd (BPCL), Air India, Container Corporation of India Ltd or CONCOR, Shipping Corporation of India, Pawan Hans, and others, as well as the proposed initial public offering (IPO) of LIC Ltd, in an exclusive interview a day after the Union Budget 2021-22 was presented. Excerpts from the book:
Q: We know that the government had major privatization plans for this fiscal year. The COVID-19 pandemic, however, derailed those plans. How sure are you that your plans for FY22 will result in the Rs 1.75 lakh crore goal being met?
A: Since a lot of our attention is on achievable goals and we also have to establish credibility, our FY22 target is slightly lower than our FY21 target. We should have exceeded our goals and stayed on track this year. However, the process was slowed by a bad COVID year. We didn’t put a halt to our plans. As a result, some of the transactions that had been stuck have been restarted, and they will be completed. At the same time, this Budget has shifted the whole agenda of structural changes in a new direction. For the first time since 2004, there is a very strong declaration of privatization intent.
Q: Nirmala Sitharaman, the Finance Minister, also revealed the specifics of the strategic sector strategy. What kind of action should we expect on that front?
A: Although it is not time-bound, the strategic sector strategy will be our policy driving force for the next four to five years. And these will be the first privatizations that may take place after we have completed some of the main transactions that we are currently working on, such as BPCL and others. The successful completion of these transactions would also give the strategic sector strategy more vigor and momentum in the future.
Q: Do you think the privatizations of BPCL, Air India, CONCOR, Shipping Corp, NINL, and Pawan Hans, as well as the LIC IPO, will be completed this year?
A: Yes, we are certain.
Q: The government will also privatise two banks and one general insurance firm, according to the Finance Minister. Could you tell us what their names are?
A: The names are yet to be determined. However, the statement makes it clear that this is the first time a public-sector bank has been privatized. That’s a big deal, and it necessitates a legislative reform. The Finance Minister also said that she would present legislative proposals. The private sector will be more interested after we have completed the privatization of one of the PSUs we have already called. As a result, we’re advising the markets to prepare for bank privatization.
Q: What steps does the government want to take in terms of asset sales? Will such sales include non-core defense and railway land?
A: It’s not good for the economy to have idle assets and idle ground. If you have land for a strategic reason, hold it. However, if you have excess non-core assets or property, you must monetize them. This procedure must be followed by every agency.
Q: Are you considering any additional IPOs or public offerings?
A: One thing is certain: the coming year’s targets will be mainly based on privatisation and asset sales. If we want to do business offers, we will do so more wisely and with the best interests of the investors in mind. Strategic sales, on the other hand, would be our priority, which is a directional change as well as a systemic reform. Via minority stake sales, you can definitely increase public ownership of public assets, but control is a problem. Markets offer a discount to the stock’s value as long as the government is in charge.