Sale of PSUs

development-of-navratna-psus-indian-bureaucracy
development-of-navratna-psus-indian-bureaucracy

The main elements of the Government’s policy towards the public sector, as announced by the Finance Minister in his Budget speech for the year 2000-2001, are:-

  • Restructure and revive potentially viable PSUs’
  • Close down PSUs which cannot be revived
  • Bring down Government equity in all non-strategic PSUs to 26 per cent or lower, if necessary and
  • Fully protect the interests of workers.

In line with this policy, financial restructuring of revivable Public Sector Undertakings (PSUs) are being done. As a result many PSUs have been able to restructure their operations, improve productivity and achieve a turn round in performance.

There are many PSUs which are sick and are not capable of being revived. The only remaining option is to close down these undertakings after providing an acceptable safety net for the employees and the workers.

Disinvestment Policy

The policy of the Government on Disinvestment has evolved during the last decade. Disinvestment in public Sector undertakings was first done during the year 1991-92. Thereafter, the Government has been disinvesting its equity holdings in public sector undertakings in a planned way with setting up the disinvestment target in the annual plan budgets. The present policy of the Government is to generally reduce its stake in the non-strategic public sector enterprises to 26 per cent (or below, if necessary). The Government will retain its majority holding in strategic PSUs.

Disinvestment proceed are to be utilised for providing restructuring assistance to PSUs, safety net to workers, reduction of debt burden and additional budgeting support for the Plan, primarily in the social and infrastructure sectors.

Strategic and Non-Strategic Classification

On March 16, 1999, the Government classified the Public Sector Undertakings into strategic and non-strategic areas for the purpose of disinvestment. It was decided that the Strategic Public Sector Undertakings would be those in areas of :-

    1. Arms and ammunitions and the allied items of defence equipment, defence air crafts and warships;
    2. Atomic energy (except in the areas related to the generation of nuclear power and applications of radiation and radio-isotopes to agriculture medicine and non-strategic industries)
    3. Railway transport.

All other Public Sector Undertakings were to be considered non-strategic. For the non-strategic PSUs, it was decided that the reduction of Government stake to 26 per cent would not be automatic and the manner and pace of doing so would be worked out on a case-to-case basis. A decision in regard to the percentage of disinvestment i.e. Government stake going down to less than 51 per cent or to 26 per cent would be taken on the following considerations :

    1. Whether the industrial sector requires the presence of the public sector as a countervailing force to prevent concentrations of power in private hands, and
    2. Whether the industrial sector requires a proper regulatory mechanism to protect the consumer interests before Public Sector Enterprises are privatised.

Progress in Disinvestment

The Disinvestment Commission was constituted on August 23, 1996 as an advisory body to make recommendations for disinvestment in public Sector undertakings referred to it by the Government. The Commission has so far given its recommendations in respect of 58 PSUs. The Commission has been reconstituted on July 24, 2001 and more PSUs are being referred to it for consideration and giving recommendations.

With the aim to establishing systemic policy approach to disinvestment and privatisaiton and to give a fresh impetus through the disinvestment programme which will emphasize increasingly on strategic sales of identified PSUs, the Government established a new Department of Disinvestment on December 10, 1999. The Department has now been made a full-fledged Ministry of Government. The first strategic sale of a PSU, viz., Modern Food Industries (India) Ltd. took place in January, 2000 after the Department of Disinvestment was set up. In March, 2001 strategic sale in another PSU, viz. BALCO was completed.

Disinvestment action is at present in progress in 27 PSUs as indicated in Annexure 1. Out of these PSUs, disinvestment process would be completed by March 31, 2002 in 13 companies, viz. Bharat Heavy Plates & Vessels Ltd. (BHPV), CMC Ltd., Hindustan Zinc Ltd. (HZL), Hotel Corporation of India (HCI), HTL Ltd., IBP Co. Ltd. Indian Petrochemicals Corporation Ltd. (IPCL), Indian Tourism Development Corporation (ITDC), Instrumentation Control Valves Ltd. (ICVL), Jessop & Co. Ltd., Maruti Udyog Ltd. NEPA Ltd. and Videsh Sanchar Nigam Ltd. (VSNL). Out of the above, the disinvestment process of HTL Ltd., and CMC is expected to be completed by October 15, 2001.

Disinvestment during the Last Two Years

  1. During the period of last two years disinvestment in following PSUs have taken place :-

PSUs Mode of Disinvestment Amount Realised

(Rs in crore)

1. Videsh Sanchar Nigam Ltd. Domestic Issue 75.00

(September 1999)

2. Gas Authority of India Ltd. GDR 945.00

(November 1999)

3. Modern Food Industries Strategic Sale 105.45

Ltd. (January 2000)

4. Bharat Aluminium Co. Ltd. Financial Restructuring 244.42

(March 2000)

5. Bharat Aluminium Co. Ltd. Strategic Sale 551.50

(March 2001)

6. Bongaigaon Refineries and Takeover by Indian Oil 658.13

Petrochemicals Ltd. and Corporation

Chennai Refineries Ltd.

(March 2001)

7. Kochi Refineries Ltd. Takeover by Bharat 659.10

(March 2001) Petroleum Corporation Ltd.

—————-

Total 3,238.60

List Of PSUs/Subsidiaries in which Strategic Disinvestment is expected to be completed during 2001-2002 with Percentage of Proposed Disinvestment of Equity

S.NO.

Name Of The PSUs

Present Govt. Shareholding/Equity – %

Proposed disinvestment percentage

1.

Air India Ltd. (IA)

100

60

2.

Bharat Brakes and Valves Ltd.

Subsidiary of Bharat Bhari Udyog Nigam Ltd.

@

3.

Bharat Heavy Plates and Vessels Ltd.

Subsidiary of Bharat Yantra Nigam Ltd.

@

4.

Computer Maintenance Corporation Ltd.

83.31

57.31

5.

Engineering Project (India) Ltd.

97.75

74

6.

Hindustan Cables Ltd.- Phase-I

98.96

@

7.

Hindustan Copper Ltd.-Phase-I

98.76

$$

8.

Hindustan Organic Chemicals Ltd.

58.61

32.61

9.

Hindustan Salts Ltd.

100

@

10.

Hindustan Zinc Ltd.

75.92

26

11.

HTL

100

74

12.

Indian Airlines Ltd. (IA)

100

51

13.

Indian Petrochemicals Corporation Ltd.

59.75

25

14.

Indian Tourism Development Corporation

89.97

Handing over the hotels located in prime locations to established hotel chains to run on long term structured contract on lease cum management basis. The hotels in other locations may be demerged into separate companies.

To sell 100 % $

15.

IBP Ltd.

59.59

33.58

16.

Instrumentation Ltd.

100

@

17.

Jessop & Co. Ltd.

Subsidiary of Bharat Bhari Udyog Nigam Ltd.

@

18.

Madras Fertilisers Ltd.

59.15

32.74

19.

Minerals and Metal Trading Corporation of India Ltd.

99.34

To reduce the Government’s shareholding to 26 %

20.

National Fertilisers Ltd.

97.65

51

21.

NEPA LTd.

96.31

@

22.

National Industrial Development Corporation

100

@

23.

Paradeep Phosphates Ltd.

100

@

24.

Sponge Iron India Ltd.

97.45 (balance of equity by Govt. of A.P.)

100

25.

State Trading Corporation

91.03

To reduce the Government’s shareholding to 26 per cent

26.

Tungbhadra Steel Products Ltd.

Subsidiary of Bharat Yantra Nigam Ltd.

@

27.

Videsh Sanchar Nigam Ltd.

52.97

26.97

 

 

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