On Monday, finance minister, Nirmala Sitharaman said that the government was looking into the complete disinvestment of 23 Public Sector Undertakings (PSUs). This will include the PSUs already approved by the cabinet for divestment.
Highlights from FMs Interview
Recently, Nirmala Sitharaman had an interview with Mr Sunil Kant Munjal, the chairman of the Hero Enterprises. The critical takeaway from the discussion was that private players could participate in all sectors. However, she highlights the government hasn’t finalised which of the divisions will be “strategic” yet. Further, even in these sectors with private players participation, only four public sectors will be given the opportunity.
Additionally, she confirms that the government is looking for the right time to sell the PSUs. Subsequently, FM said that she’d soon meet with the NBFCs and SFBs to discuss and review credit from them to businesses. Alongside, Sitharaman mentions about availing loans under the Emergency Credit Guarantee Scheme for MSMEs. The scheme has a total of 1,30,491.79 crore sanctioned under it, of which 82,065.01 crores has been disbursed as loans.
In the 2020-21 fiscal budget, Rs. 2.10 lakh crore was the target for disinvestment. Out of this, 1.20 lakh crore will be achieved from selling PSUs, and another 90,000 crores are from selling stakes in financial institutions, highlights FM.
Privitization Policy Including Insurance sector
The PM’s office, the Finance Ministry and the Niti Aayog have discussed including the insurance sector for strategic disinvestment. Among the insurances, the government is looking for partial divestment of the Life Insurance Corporation. Considering that, the LIC faces transparency problems and the lack of a digital presence in comparison with its private competitors. Also, LIC has been losing market share lately to private players like HDFC life insurance and ICICI. Even though the listing might aid in the betterment of transparent policy and governance, the entire staff are against the privatization. If the LIC has to be listed, then the government must act swiftly.
Mangesh Ghogre, executive director and head of equity capital markets at Nomura India assures that as uncertainty increases, people will start taking insurance more seriously in this COVID era. So, it is essential for public insurance companies survival to catch up to private competitors. Acknowledging that, partial disinvestment is a good step in this direction.
Disinvestment Across a Variety of Sectors
The government plans to privatize all the public businesses in both strategic and non-strategic sectors. Under the strategic areas, one holding will remain with the public, and others will be opened up for privatization. The limit of 4 PSUs in strategic sectors will help the government increase tax revenue. In this regard, the government is looking for potential investors for the BPCL and Air India as well. Further, it has pushed the deadline for the same.
The government is looking for disinvestment in public sector banks as well. Accordingly, the cabinet has proposed to merge the existing banks to make an even smaller number of undertakings to ensure robust credit flow and better administration. Some do warn that PSBs play a crucial role in India’s advancement and therefore, cannot be left entirely at the hands of private players.
In all, the economic slowdown affects the country’s tax revenue. And the necessary steps are taken in the form of disinvestment policies. However, it does go against the self-reliant Atma Nirbhar Bharat ideology. Now, the government must decide how to recover from this economic pitfall.