Government blames commodities slump for disinvestment challenges

Mumbai: As challenges emerge in meeting the mammoth Rs 69,500-crore disinvestment target for this fiscal, the government today put the blame on global commodities slowdown saying many identified PSUs are from this space.

"One of the reasons why the divestment process is challenging right now is because many of the companies we are considering for divestment are in the commodity industries," Minister of State for Finance Jayant Sinha said today.

"Whether it is Coal India or OMCs (Oil Marketing Companies) and so on. They are impacted by global commodity prices," Sinha said here at an investment conference.
Sinha, who himself was a banker before becoming a minister last year, further said the government has to take that into consideration when and to what extent it will take the PSUs to markets.

"Obviously, we have to ensure that we get best possible valuation for these valuable enterprises," he said.Sinha, however, exuded confidence about meeting the overall tax revenue collection targets.

"On the tax side, we are very close to all our targets. Direct taxes are down somewhat, (but) indirect taxes are doing very well. In that sense, as far as taxes are concerned, we are in a good position.

"With respect to divestment and non-tax revenues, we will have to see how they balance themselves out," he said, while hinting at dilution of the government stake in IDBI Bank.

"We still have quite number of opportunities even on divestment side. We will consider transforming IDBI Bank in a manner similar to the way Axis Bank was done. We have opportunities there as well," Sinha said.

Axis Bank was formerly known as UTI Bank where the erstwhile state-run entity UTI used to be the main stakeholder. The government sold its remainder 9 per cent stake in Axis Bank last year for over Rs 5,500 crore.

When asked whether the government would bring in a strategic investor in IDBI Bank, Sinha evaded any direct answer and said, "We will have to see how that plays out."

The Department of Disinvestment is said to be of the opinion that the PSU stake sale target for the current fiscal should be more than halved to Rs 30,000 crore in view of volatility in the stock markets.

The government has budgeted to raise Rs 69,500 crore via disinvestment in the current fiscal. Of this, Rs 41,000 crore is to come from minority stake sale in PSUs and the remaining Rs 28,500 crore from strategic stake sale.

With seven months of the current fiscal about to be over, the government has been able to sell sell stake only in four companies -- PFC, REC, Dredging Corp and IOC -- to net Rs 12,600 crore.

For disinvestment in 2015-16, the government has a pipeline of over 20 PSUs for which it has the Cabinet's nod. These include, 10 per cent stake sale each in OIL, Nalco, NMDC, and 5 per cent each in NTPC, ONGC, BHEL. Besides, plans are afloat for a 10 per cent stake sale in Coal India.