Government may cut stake in state-run companies to 49%
The government is readying a roadmap to lower its stake in all central public sector enterprises (CPSEs) to 49% in three years, except for those operating in sectors of strategic importance such as defence and oil. This will increase autonomy, reduce political interference and also raise the valuation of the remaining government holding.
The companies in which the government is likely to pare its stake include large ones such as NTPC Ltd, Steel Authority of India Ltd and Power Grid Corporation of India Ltd among others. The companies are being identified by the government’s apex planning body, NITI Aayog, said a senior government official aware of the deliberations. There are over 250 CPSEs in which the government holds 51% or more.
“The plan is to reduce government’s stake in most CPSEs to at least 49% over the next three years besides ensuring that the boards of these firms are more professionally managed,” he said.
According to the official, the government has no business to be running these companies and should focus instead on social sector development. “We must exit all companies except the ones that have some strategic importance,” the official added.
There is no change in law required as in the case of state-run lenders, where the Banking Companies (Acquisition & Transfer of Undertakings) Act mandates a minimum 51% government holding.
Another government official said some of the firms where the government may like to retain majority stake will be in the defence and oil sectors. “In some companies such as BPCL and HPCL the government has to maintain at least 51% holding as a Supreme Court verdict in 2003 had restrained the government from privatising them,” he added. Under Section 2(45) of the Companies Act, 2013, a government company is one in which not less than 51% of the paid-up capital is held by the central government or a state government or partly by both or one or more state governments.
A senior finance ministry official said that the government has to take a balanced approach and not all CPSEs can be privatised.
“It depends on how fast NITI Aayog recommendations are taken up by the respective administrative ministries,” he said.
The finance ministry official said that lowering stakes to 49% or below will depend on whether changes are required to certain laws. He also said that the government would need to take a call on whether to lower stakes in companies that serve “social needs.”
Last year, NITI Aayog suggested strategic disinvestment of 34 sick public sector units after the Prime Minister’s Office asked it to look into the viability of such companies. It recently moved the fifth list with 11 PSUs for to the finance ministry and PMO.
Of the total, eight, including Scooters India and Pawan Hans, are in the process of inviting expressions of interest while five, including Engineers Project (India) and Hindustan Prefabs, will be merged with other CPSEs.
In seven other CPSEs such as HLL Lifecare and Dredging Corporation of India Ltd, the government is in the process of appointing advisors to lay out a roadmap for disinvestment.