The story of India’s two biggest privatizations – Air India and BPCL

Nearly two decades after the last privatization, this year marked a historic disinvestment when the loss-making national carrier Air India was sold to Bye, This was possible only when the government changed track from selling its 76 per cent stake in the national carrier to block its entire 100 per cent stake, while giving bidders the option to decide how much debt they are willing to take. Above.

But in the case of BPCL, the government ignored suggestions to follow its time-tested policy of blocking 26 per cent stake along with management control, as it did in the case of Hindustan Zinc and Balco. Instead, it offered its entire 52.98 percent in a company operating in the Sunset area.

The result – just three bids came in, and two of them struggled to arrange finance for the acquisition, which as per the current market value should not be less than USD 10-12 billion.

So, while Air India got privatized, BPCL is dragging on. Some say that if the government had offered just 26 per cent with management control, it would have given a better price for the remaining stake after the company added value under private management.

But the biggest disinvestment in India’s history is expected in the January-March quarter of 2022, with the country’s largest insurer Life Insurance Corporation (LIC) coming up with an initial public offering (IPO) and listing itself on stock exchanges. are supposed to. The government currently holds 100 per cent stake in LIC.

Yet the biggest achievement of circa 2021 was the removal of the taboo that ‘family silver’ was being sold. Privatization helps taxpayers’ money to take root more than ever before.

The year 2021 was a milestone in many aspects in terms of the government’s disinvestment programme, as it saw the first privatization in 19 years and classified government companies as strategic and non-strategic – making it clear to the private sector that The government will run. The thing when it says ‘the government has no business to do business’.

Two CPSEs, Air India and Central Electronics Limited, were privatized in 2021 – the first since 2003-04.

While the Tata group bought the ailing carrier Air India for 18,000 crore, was sold to Delhi-based firm Nandal Finance & Leasing to Central Electronics under the Ministry of Science and Technology. 210 crores.

Also, work is underway on privatization of 5 CPSEs – BPCL, BEML, Shipping Corp., Pawan Hans and NINL. Alliance Air and three other Air India subsidiaries will also be privatized during 2022.

Prime Minister Narendra Modi in early February had set the tone for making a strong pitch for privatization of public sector units and financial support to ailing PSUs as a burden on the economy and not just because of legacy. should be run.

The government unveiled the new Public Sector Enterprises (PSE) policy, which had four strategic sectors in which the “minimum” number of CPSEs would be retained and the rest would be privatized or merged or made a subsidiary of another CPSE or closed. Will go

The four sectors are nuclear energy, space and defence; transport and telecommunications; electricity, petroleum, coal and other minerals; and banking, insurance and financial services. In non-strategic sectors, CPSEs will be privatized, or considered for closure.

The policy states that NITI Aayog will recommend CPSEs under strategic sectors that are to be placed under government control or to be considered for privatization or merger or to be placed under the control of any other PSE or to be closed down.

The Alternative Mechanism for Strategic Disinvestment, consisting of the Finance Minister, the Road Transport Minister and the Administrative Minister, will give the final approval for retaining the CPSEs, or privatization or merger or subsidiaries or winding up.

The target has been set in the budget for 2021-22. 1.75 lakh crore from disinvestment. its, 1 lakh crore is estimated to come from sale of government stake in PSU banks and insurance companies – the majority from LIC’s IPO. sum of The CPSE has a budget of Rs 75,000 crore from stake sale.

*Asset Monetization

The government also launched a four-year (FY 2022-2025) road map 6 lakh crore asset monetization scheme, a major part of which will be through brownfield assets of road, railways and electricity of central ministries and public sector entities.

The sector wise target road (over.) set for monetization are 1.60 lakh crore), Railways ( 1.52 lakh crore), power transmission ( 45,200 crore), power generation ( 39,832 crore) and Telecom ( 35,100 crore).

*privatization

Since coming to power in 2014, the NDA government has talked about the sale of PSUs, especially loss-making ones, such as Air India. It sought transfer of the sale of government entities like HPCL to ONGC, another PSU, as a strategic sale, which was also criticized by the CAG.

It is now trying to push for privatization as a major reform initiative and has even added state-run banks and a general insurance company to the privatization list.

Air India, which was alive Rs 20 crore per day fund from the government was the case of an elephant in the room of previous governments.

After a failed attempt in 2018, when the government was selling 76 per cent in the national carrier, the government issued fresh EOIs for 100 per cent sales in 2020. But Covid delayed the privatization plan and the sale process got stretched till 2021. The total debt on Air India was 61,562 crore till August 31, 75% of this loan or 46,262 crore one special purpose vehicle will be transferred to AIAHL before the airline is handed over to the Tata group by the end of this month.

Now, the monetization of Alliance Air and 3 other Air India subsidiaries – AI Airport Services Limited (AIASL), AI Engineering Services Limited, Hotel Corporation of India, which runs Centaur hotels in Delhi and Srinagar, is underway.

This story has been published without modification in text from a wire agency feed. Only the title has been changed.