Having set the highest-ever disinvestment target of Rs 1.05-lakh crore for the current fiscal, the Modi government is not only looking at selling assets of Central Public Sector Enterprises (CPSEs) but also strategic disinvestment in profitable state-run behemoths. In fact, the Department of Investment and Public Asset Management (DIPAM) has already identified probable candidates for stake dilution and is reportedly in the process of floating a discussion paper to weigh the move and hash out a strategy for implementing it.
So far, under India's disinvestment policy, the government's stake in such PSUs has been maintained at above this threshold. But Finance Minister Nirmala Sitharaman proposed to change the status quo in her Budget 2019 speech, saying the government was considering lowering its stake to "an appropriate level" on a case-to-case basis. "Government has also decided to modify [the] present policy of retaining 51 per cent Government stake to retaining 51 per cent stake inclusive of the stake of government-controlled institutions," she added. In other words, the government is keen on cutting its direct holding in select public sector entities to below 51 per cent.
Nearly a dozen companies have been identified in a preliminary list, including those in which the government's holding ranges from 50% to 60%. Sources told The Times of India that the list includes Maharatna and Navratna CPSEs such as Indian Oil Corporation, NTPC, Power Grid, Oil India, GAIL, NALCO, Bharat Petroleum Corporation Limited (BPCL) and Engineers India Limited.
They added that DIPAM will hold consultations with various ministries to try and resolve any issues linked to the stake dilution plan. After all, crucial issues such as reservation policy in PSUs need to be discussed threadbare to ensure that no controversies emerge after the stake dilution.
While the quantum of dilution has not been finalised and would depend on how the discussions proceed, the buzz suggests that the government is aiming to wrap up at least two-three such cases by the December quarter of the current fiscal. Once the discussions are complete, the Centre will take a final view on the process and a Cabinet note will be floated accordingly.
In tandem, the Centre is also mulling an IPO for state-owned Life Insurance Corporation (LIC), which is India's largest insurer, cornering over 70 per cent of the market share. As per reports, the government will initially sell a small tranche of the behemoth through the IPO and later dilute the government's holdings. If things go to plan, LIC would emerge as India's largest company by market capitalisation, overtaking the likes of Reliance Industries and Tata Consultancy Services.