PSU Privatisation: 300+ PSUs may shrink to barely two dozen
Following the new policy that focuses on privatisation in non-core sectors, the government may reduce the number of public sector enterprises to just around two dozen, from over 300 at present. The loss making state-run enterprises will be shut.
According to top government sources, the final number will be decided by the Union cabinet based on recommendations by NITI Aayog. The NITI Aayog has been tasked with identifying the next set of companies to be offered for strategic sale.
The Union Budget 2021 made it very clear that there will be only four key strategic sectors. A maximum of three or four public sector units will be incorporated in these key segments.
PSUs would be privatised or closed in non-strategic sectors.
The government will make an exit from any area where PSU’s exist. This means that there will be less than two dozen PSU’s left. These areas include the banks and insurance companies (especially the general insurance space).
Atomic energy, space, defence, transport, telecommunications, power, petroleum, coal and other minerals and banking, insurance and financial services were identified as strategic sectors in the third budget by FM Nirmala Sitharaman. According to the policy there will be a bare minimum presence of the public sector enterprises in these strategic sectors.
The remaining Central Public Sector Enterprises in the strategic sector will be privatised or merged or subsidiarised with other CPSEs or closed.
CPSEs will be privatised in the non-strategic sectors or else they will be shut.
This policy marks a huge shift in the government’s attitude towards privatisation of state-run companies. The policy flags government’s commitment to go ahead with the process.
The Public Enterprises Survey 2018-19 reported that as of March 31, 2019, there were 348 central public sector undertakings. Out of these 348 CPSE’s 249 were operational. Remaining 86 were under construction and 13 were under closure on liquidation.
The policy will have to face to a set of challenges. According to government officials there were nearly a dozen consulting firms where the appetite may be low. A senior officer said, “It will be easier to set up a new consulting company, and get manpower from some of the PSUs, instead of taking over the entire baggage.” (TOI)
The government will have to carefully weigh the appetite for large stake sale. Back to back privatisation of companies in sectors such as oil may not find too many takers or fetch the government adequate value.