The Government notified the new Public Sector Enterprise (PSE) Policy for Atmanirbhar Bharat. The new PSE Policy envisages classification of CPSEs into Strategic and Non-Strategic Sectors and exempts certain CPSEs such as those setups as not for profit companies under the Companies Act, 2013 or those supporting vulnerable and weaker sections of society, from the scope of the Policy.
The strategic sectors as per the policy are as under: Atomic Energy, Space, and Defence Transport and Telecommunication Power, Petroleum, Coal, and Other Minerals Banking, Insurance, and Financial Services.
The Department of Public Enterprises (DPE) has been brought under the Ministry of Finance of Cabinet Secretariat and thereafter, Finance Secretary certain responsibilities between DIPAM and DPE.
DPE has been entrusted with the responsibility to identify CPSEs for closure or privatization in non-strategic sector in consultation with administrative ministries / departments and to take in principle approval from CCEA in respect of such identified CPSEs’ Besides, DPE has also been entrusted with the task of setting up a Special Purpose Vehicle (SPV) for asset monetisation once the SPV is approved by the Cabinet. DPE is also required to drive the closure process for CPSEs approved for closure, on the lines of disinvestment process being run by DIPAM.
In the Budget for 2023-24, Finance Minister Nirmala Sitharaman had set a target of Rs 51,000 crore for proceeds of the sale of Union government shareholding in central public sector undertakings (CPSUs). As per available indications, the government may fall short of this target by Rs 30,000 crore.
The shortfall in proceeds during the current fiscal year is in sync with the trend seen since 2015-16 when the government started disinvestment with a particular focus on ‘strategic’ sale (a sophisticated nomenclature for a share sale that reduces its holding in the CPSU to below 50 per cent or privatization). Barring two years viz. 2017-18 and 2018-19 when the actual proceeds exceeded the target, in the remaining six years, the achievement was far short
Even during 2017-18 and 2018-19, the government could achieve the target primarily because of the two big-ticket sales of its shares in one CPSU to another viz.
(i) sale of its 51.11 per cent shareholding in Hindustan Petroleum Corporation Limited (HPCL) to the Oil and Natural Gas Corporation (ONGC) during 2017-18 that yielded Rs 37,000 crore;
(ii) sale of its 52.63 per cent stake in Rural Electrification Corporation (REC) to the Power Finance Corporation (PFC) during 2018-19 yielding Rs 13,000 crore. These sales can’t be termed as strategic as the purchaser being another CPSU namely ONGC/PFC, the Government continues to have effective ownership over the divested entity viz. HPCL/REC.
The Niti Aayog identifies companies for disinvestment which are then considered by the Core Group of Secretaries on Divestment (CGD), a long-drawn process by itself, which takes it to the Alternative Mechanism (AM) – a group of ministers, including finance, road transport & highways, administrative reforms, etc., – for approval. After AM’s approval, the Department of Investment and Public Asset Management (DIPAM) moved a proposal for in-principal approval of the Cabinet Committee on Economic Affairs (CCEA).
Taking all these approvals is a time-consuming process and by the time these are in place, the market scenario could become adverse.
In an approach outlined in the Budget for 2021-22, the government divided CPSUs into two broad categories i.e. strategic and non-strategic. The strategic group covers atomic energy, space and defense; transport and telecommunications; power, petroleum, coal and other minerals; and banking, insurance and financial services. The non-strategic category includes all other sectors such as industrial and consumer goods, hotel and tourist services, trading, and marketing.
