India to let public firms undertake stake sales, exits

India has approved a proposal to allow directors of public sector enterprises (PSEs) to undertake divestments, stake sales or closures of subsidiaries, a move that is expected to expedite decision-making and exits from lossmaking ventures.

Delhi has also created an alternative mechanism for "Maharatna" PSEs, the government said on 18 May. "Maharatna" is a status awarded by the government to large-sized firms to enable them to expand their operations in both domestic and global markets. The alternative mechanism — comprising a group of ministers — can grant in-principle approval for strategic divestments, minority stake sales, unit closures and sales of shares in joint ventures of the holding company of Maharatna PSEs. Maharatna PSEs include refiner IOC, upstream firm ONGC, gas distributor Gail and producer Coal India.

PSE directors previously had no control over divestments and subsidiary closures, although they could make equity investments to set up joint ventures and subsidiaries, as well as undertake mergers and acquisitions, subject to certain conditions.

Delhi has set a divestment target of 650bn rupees ($8.4bn) for the 2022-23 fiscal year ending 31 March, according to the 2022-23 national budget.

But its plan to sell its entire 53pc stake in state-owned Bharat Petroleum (BPCL) has faced repeated delays, prompting the government to shelve plans to privatise the refiner.

The government planned to close the sale this year, after it was delayed from 2021. "Only one bidder [is] left and what I heard is [the] government is not keen on dealing with one bidder, and [the] price was unattractive," a source close to the refiner told Argus.

The government's sale of a 1.5pc stake in ONGC in late March was part of a divestment target of Rs780bn for 2021-22. But it has attracted only about Rs130bn in divestment receipts, according to the Department of Investment and Public Asset Management.

By Pratima Pareek