While the names of two public sector banks (PSBs) and one general insurance company to be privatised are yet to be decided, just announcing that state-run banks are up for privatisation was a big statement of intent in itself, Tuhin Kanta Pandey, Secretary of the Department of Investment and Public Asset Management, or DIPAM, told Moneycontrol on February 2.
In an exclusive interview a day after the Union Budget 2021-22 was presented, Pandey said the coming year’s divestment target of Rs 1.75 lakh crore is based mostly on privatisation plans of Bharat Petroleum Corporation Ltd (BPCL), Air India, Container Corporation of India Ltd or CONCOR, Shipping Corporation of India, Pawan Hans and others, and the planned initial public offering (IPO) of LIC Ltd. Excerpts:
Q: We know that the government had big plans for privatisation in the current financial year. However, the COVID-19 pandemic derailed those plans. How confident are you of your plans in FY22 and meeting the Rs 1.75 lakh crore target?
A: If you would have looked at our FY22 target, it is slightly lower than FY21, because a lot of our focus is on realistic targets, and we also have to build credibility. We could have met our targets this year, and were on track. But there was a bad COVID year which derailed the process. We did not stop our preparations. So several of those transactions which were stuck, they have been resumed, and they will be carried forward and culminated. At the same time, this Budget has given a directional shift to the whole agenda of structural reforms. So for the first time since 2004, there's a very clear statement of intent of privatisation.
Q: Finance Minister Nirmala Sitharaman also announced the details of the strategic sector policy. How much action will we see on that front?
A: While officially it is not time-bound, for the next four to five years, the strategic sector policy will be our policy guiding force. And once we have achieved some of the key transactions that we have taken forward now, like BPCL and others, these will be the first privatisations that could take place. The successful culmination of these transactions will also give a greater drive and momentum to the strategic sector policy going forward.
Q: So you are confident of BPCL, Air India, CONCOR, Shipping Corp, NINL and Pawan Hans privatisation being concluded in the coming year, as well as the LIC IPO?
A: Yes, we are confident.
Q: The Finance Minister also said the government will privatise two banks and one general insurance company. Could you give us the names?
A: The names haven’t been decided yet. But the announcement shows intent that this is the first time that public sector bank privatisation has been announced. That's a big thing, which also requires a legislative change. And the Finance Minister said she would bring the legislative proposals. Once we have completed the privatisation of one of the PSUs we have already named, there'll be a greater interest from the private sector. So we are telling the markets to get ready for a bank privatisation.
Q: How does the government plan to move forward on asset sales? Will non-core defence and railway land also be part of such sales?
A: If you have idle assets idle assets and idle land, that serves the economy no good. If you have land for a certain strategic purpose keep it by all means. But if you have excess non-core asset or land, that needs to be monetised. Every department has to undergo this process.
Q: Are you also planning other IPOs and offer for sales?
A: One thing we are clear about is that we are largely basing the coming year’s targets on privatisation and asset sales. If we want to do market offerings, we will do it more intelligently, keeping the investors interest in mind. But strategic sales will be our focus, and that is a directional shift and a structural reform. You can certainly have wider public ownership over public assets through minority stake sales, but control is an issue. So long as there is a government control, markets give a discount to the worth of the stock.