The Government Plans to Raise Rs. 72,500 by Divesting in EIL, BHEL, NBCC, Oil India, and 9 Rail PSUs for FY 2017-18

Government Disinvestment Plans

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The Logistics Headlines, New Delhi, 7th March : The Government is going to sell 10% equity stake each in its state-run-firms Oil India Ltd. and Bharat Heavy Electricals, striving to raise about Rs. 9,000 crore as decided to collect funding from the equity stakes it has in 16 PSUs for meeting the disinvestment target stated for the financial year of 2017-18. The companies itself could be urged to purchase the shares, or the same would be sold in the open markets.
As per a news reports, 10% stake of the capital goods for the engineering giant BHEL will get the government Rs. 5,220 crore. In addition, same percentage of stake in Oil India (oil exporter) shall fetch it Rs. 3,770 crore. The strategic sale of the stakes in profitable PSUs shall boost the state’s revenue, which can reduce the fiscal deficit. However, the government has not been able to complete its disinvestment targets as seen in the past.

One of the government officials said that the response in recent disinvestment to offers have been good, and stock markets are performing well, and the sale of stakes may meet its target at better prices this time.

Who are Part of the Divesting Plans by the Government?

The government may ask NBCC and Engineers India Ltd. to buy the shares back, by which it wishes to earn Rs. 280 crore and Rs. 390 crore, respectively. Earlier it has reached a target for earning Rs. 56,500 with divesting its stake held in public sector undertaking present in FY 2016-17, and until now it has generated greater than Rs. 31,000 crore, setting a more ambitious target of earning Rs. 72,500 crore from divesting for the next financial year.

The Union Cabinet earlier this year had approved the listing of five-state-run general insurance firms. It may begin however only in the next financial year, and first listing is expected to bring output by September-October. Government had received Rs 9.34 crore by transferring shares to the employees of CONCOR in September 2016 post OFS of the company. More stakes may be sold off for Container Corporation of India, as it is also one of the listed for divesting by the government.

Disinvestment Targets Achieved for Financial Year 2017-18

For FY 2017-18, amidst marquee disinvestment projects, there is a plan for launching the second CPSE ETF, which is the exchange-traded fund of public sector companies. It aims at selling 10% equity stake in three state-run railway enterprises: Ircon, IRFC, and IRTC through Initial Public Offer (IPO) in 2017-18. The Ministry of Railways has now listed at least nine more units for a likely IPO.

At the beginning of 2017, the DIPAM (Department of Investment and Public Asset Management) had introduced its second tranche for CPSE exchange Traded Fund that was over-subscribed couple of times and the sale fetched about Rs. 6,000 crore for the exchequer.  Also, the government may divest 10% stake also in Coal India, where it holds currently 79.11% of stakes. It will also disinvest 5% equity share in NALCO (National Aluminum Company Limited) through offer for sale of shares. The OFC will cost around Rs. 62.5-63.5 including discounts. NALCO has the government owning 75% of the company.

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