The government expects ₹94,000 crore in revenue from disinvestment and dividends in the next financial year, as per Budget projections. Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey said the target is achievable as most of the action would take place in 2023-24. Speaking to Rajeev Jayaswal about what he described as a calibrated approach for maximising value, Pandey said the strategic sale of Bharat Petroleum Corporation Ltd (BPCL) has been put on hold because of geopolitical reasons, but it is not off the table. Edited Excerpts:
Q: Budget has trimmed disinvestment targets from ₹65,000 crore in Budget Estimate of 2022-23 to ₹50,000 crore in the Revised Estimates for the fiscal year. Similarly, for FY24, BE for the disinvestment proceed is kept at ₹51,000 crore. What are the reasons for keeping the estimates low?
A: DIPAM is responsible for both — disinvestment and dividends [by central public sector enterprises], and their proceeds go to the consolidate fund. Put together, ₹1.05 lakh crore was the BE for 2022-23, which was revised to ₹93,000 crore [RE 2022-23] and for 2023-24 BE, it is ₹94,000 crore. As far as disinvestment is concerned, it depends on market situation — both for general market and for the stock-specific sector. The purpose is not disinvestment at any cost. The purpose is to proceed in a calibrated manner to realise maximum value. There is no desperate sale to meet targets.
Q: It seems that the government is not pushing for the follow-on public offering (FPO) of Life Insurance Corporation in the next financial year (2023-24).
A: Besides company’s performance, we also take care of minority shareholders, particularly in the listed entities. It is the responsibility of the company and the government to consider interests of minority shareholders who bought shared because of trust factor. We cannot offload shared in the stock market frequently. We need to give time for stability, else there would be price pressure. That is why we had closed the equity ETF [exchange-traded funds] due to price overhang and other issues. They wanted a calibrated approach. [The government had two of them Bharat 22 and CPSE Equity]. Our objective is also to create value for all shareholders.
Q: How?
A: Take records of CPSE index in both BSE and NSE for last three years. We have performed better than the main indices of BSE and NSE, consistently in all three years. What is the reason for that? We created value for the shareholders, focused on corporate governance by CPSEs, asked them to communicate effectively in the market, followed consistence dividend policy, which means profitability. We have listed 17 companies since 2014-15. Our philosophy is capital management. We promoted buybacks, our firms offered bonus shares.
Q: What are the assets under the disinvestment pipeline?
A: Disinvestments, particularly strategic, is time intensive from process point of view and depends on various factors besides market situation. Currently, we are focusing on completing what we have already initiated. Besides assets – something visible, there are liabilities associated with these firms, which is not quite obvious. For example, we are facing stiff resistance from RINL [Rashtriya Ispat Nigam Ltd or Vizag Steel], which is unable to achieve its envisaged capacity of 7 million tonnes, while its potential is of 20 million tonnes. It is the loss to the state’s economy. Due to local resistance the process is delayed. Compared to that Neelachal Ispat unlocked huge value for the Odisha government after its disinvestment. Employees and creditors were paid dues and in just three months its blast furnace started. The location is all set to become largest steel producer, raising Odisha’s GSDP [gross state domestic product].
Q: What about strategic disinvestment of BPCL?
A: It comes under strategic sector. But, government took decision to disinvest it because it had two more companies in that sector [the other two are Indian Oil Corporation and Hindustan petroleum Corporation]. The idea was to create competition. Due to geopolitical reasons, the time is not conducive to relaunch it. However, it is not off the table as Cabinet had approved it.
