Disinvestment’s tough climate call: The hurdle in govt’s fund-raising path

What is the News?

The Prime Minister had a meeting with private equity and venture capital fund managers to get a sense of how they read the government’s disinvestment plans.

What are the Government’s Disinvestment plans?

The Government of India has released  ‘Public Sector Enterprise Policy’ and its guidelines.

As part of guidelines, the Department of Public Enterprises will identify the CPSEs either for closure or privatisation in the non-strategic sectors.

And within the strategic sectors, which includes CPSEs in energy and minerals, only a bare minimum presence is to be maintained.

What are the issues in India’s Disinvestment plans?

Since 2004, there has been no such strategic sale of government assets in the market. 

Domestic capital has almost no experience of how to buy these government companies and gradually transform them into successful private sector entities. The sale price of these companies is also massive. 

This means that India’s private sector will need to borrow from banks and financial institutions to buy these companies. But India’s state-owned banks, except the State Bank of India, do not have the capacity to evaluate these purchases. The Private Banks also cannot give out that much larger amount.

Hence, the only way left is to take the help of foreign capital and technology. But the foreign companies are hesitant to invest in such sectors unless they offer verifiable long term climate plans. Except for NTPC, no other CPSE has taken measures in the climate sector.

What is the way forward then?

There is money to buy the CPSEs. But those buyers will need firm assurance that the disinvestment programme will keep the environmental issues front and centre of their corporate plans.

Source: This post is based on the article ‘Disinvestment’s tough climate call: The hurdle in govt’s fund-raising path’ published in Indian Express on 22nd Dec 2021.