DIPAM Secretary: ‘Staggered divestment approach’

Government will undertake a staggered method in implementing the privatisation coverage for CPSEs and banks as “indiscriminate divestment could suppress” worth of Central Public Sector Enterprises. Basing disinvestment choices on the benchmark inventory indices was not a superb technique and that providing all the things as if on a “fire sale” would yield no profit, Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management (DIPAM) instructed The Indian Express on Wednesday.
The Union Budget for 2021-22 introduced within the Parliament on Monday unveiled a strategic disinvestment coverage, underneath which the federal government has recognized 4 strategic sectors by which it is going to proceed to have “bare minimum presence”. This consists of the monetary companies sector, and the federal government introduced the sale of two state-owned banks and one public sector basic insurer.
Even because the monetary establishments for strategic gross sales haven’t been recognized but, Pandey mentioned that announcement of a quantity meant there was a way of urgency in conducting these transactions. “It is both a statement of intent and of action. The FM (Finance Minister Nirmala Sitharaman) said two things, statement of intent is that we will privatise banks but she also gave the numbers — two banks and one insurer — so there is an urgency there. It’s not merely going for a legislative amendment and wait and watch, it is also a target that is being given to the Department of Financial Services,” he mentioned.
When requested whether or not privatising two banks whereas the federal government continued to personal the remaining ten lenders was contradictory to its plan of getting “bare minimum presence” in a strategic sector, Pandey mentioned: “…early success in our program will lead to more offerings in future. There is no point offering everything, it’s not like a fire sale. Our process is laid down and is based on good competitive bidding”. Government-led capital spending will create lot of demand in non-public sector, ultimately creating alternatives for them to amass public property for including capacities, he mentioned.
In the Budget, the Centre pegged the disinvestment goal for the upcoming fiscal at Rs 1.75 lakh crore. This is in comparison with Rs 2.1 lakh crore budgeted in 2020-21, of which Rs 19,499.07 has been raised to date whereas the funds has pegged revised estimates at Rs 32,000 crore for the fiscal 12 months. Offer for Sale has been the popular route for disinvestment as the federal government raised Rs 4924 crore by OFS of HAL, Rs 4473 crore in case of IRCTC OFS and Rs 2737 crore by SAIL OFS.
“Many people are pointing out that the target has been revised from Rs 2.1 lakh crore to Rs 1.75 lakh crore. The point is that you can write any number but you have to successfully culminate it into transactions…We should go a little bit deeper into the Rs 1.75 lakh crore number, which is a very ambitious number. If you have a fiscal deficit target and your revenue and expenditure projections, whatever balance remains…as a balancing number if you say Rs 2.10 lakh crore, has a bottom-up exercise been done of whether you’ll be able to do it,” Pandey mentioned.
He additionally identified that whereas the broad markets continued to carry out effectively, the disinvestment goal for 2020-21 suffered as a result of the federal government’s two predominant deliberate choices — Air India and BPCL — belonged to sectors that had been instantly hit by the pandemic. “When money was coming in during COVID time, it was restricted to very few companies. There were a large number of companies in power, oil, etc because oil prices and power demand crashed and their stocks crashed. Most of our companies are in these sectors and not in sectors like IT,” he mentioned.

“We cannot have the headline SENSEX to tell us that this is a good environment. One should watch the CPSE index. Only then it will give you an opportunity. If we do indiscriminate disinvestment, we only depress the value of CPSE stocks, which means investor wealth goes down, which means they are relatively less prepared to subscribe to our offerings and this leads to further discounts, people exiting in hordes and it leads to a crash in our stocks. That’s not a good strategy,” he added.
From its peak worth of 2798 recorded in January 2018, NIFTY CPSE Index had been on a gradual decline until March 2020, when it hit a trough of 1137 — a fall of over 59 per cent — earlier than rebounding to 1678 as on February 3, as per information from National Stock Exchange.
“…strategic sale is where market is favourable. That’s where they (the market) say that they will give more value to private management over public sector management,” Pandey mentioned. “We have to do these sales selectively and intelligently and not indiscriminately. We have to build our disinvestment on strategic basis,” he mentioned.