International travel restrictions put brakes on strategic stake sale plans: DIPAM Secretary

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NEW DELHI: Restrictions on international travel due to the pandemic have put brakes on strategic disinvestment of CPSEs, like Air India, but completing the transactions remains a priority of the government, DIPAM Secretary Tuhin Kanta Pandey said on Wednesday. The government has already invited bids for strategic sale of national carrier Air India and oil major BPCL. However, their bid deadlines have been extended a couple of times on account of COVID-19 pandemic.

For BPCL, in which the government is selling 52.98 per cent stake, the deadline has been extended till July 31. For 100 per cent stake sale in Air India, the deadline for bid submission is now August 31.

Pandey said since strategic disinvestment involves a long-term commitment, investors engage deeply into the transaction, which includes site visits.

“Normally strategic disinvestment takes 8-9 months…. To a lot of extent COVID has put a brake on this because international travel has virtually stopped. To some extent, we have to grant extension to some of the EoIs that we have issued. It is not that the investors are not engaged, but they want more time. Because one thing which is not open yet is international travel,” he said.

The official asserted that the government’s policy has marked a change from selling only loss making public sector units to profit making ‘blue-eyed boys’, like BPCL.

“Strategic disinvestment completing what we have done (initiated the process) is a matter of priority. Also building up a healthy pipeline… The idea is we are trying to give more space to private sector in terms of brownfield investments. Once these enterprises are strategically privatised,” Pandey said at a Ficci event here.

Talking about Air India sale, he said the government has restructured the Expression of Interest (EoI) of Air India to attract investors.

“We restructured the EoI of Air India with deep sense of responsibility that we will be successful this time. A lot of debt restructuring was done, rationality was brought in balance sheet, concerns of investors were met in EoI.

“Unfortunately COVID has led to a situation where travel market is in a state of uncertainty, so therefore people are waiting and watching, so people will have to persist and persevere in these transactions…and I am sure we will certainly see the light of the day in privatisation that we have been waiting for,” he said.

Pandey said that it would be important to sell the CPSEs at the right value and build a healthier pipeline for strategic disinvestment so that such stake sale takes place on regular basis.

For 2020-21, the government has set a disinvestment target of Rs 2.10 lakh crore. Of this, Rs 1.20 lakh crore will come from disinvestment of public sector undertakings and another Rs 90,000 crore from stake sale in financial institutions.

The government in May announced that a new coherent Public Sector Enterprises Policy will be formulated to push reforms in Central Public Sector Enterprises (CPSEs).

Under the Policy, a list of strategic sectors will be notified where there will be at least one, and a maximum of 4 public sector enterprises, apart from private sector companies. In other sectors, CPSEs will be privatised depending upon the feasibility.

The Department of Investment and Public Asset Management (DIPAM), which manages the CPSE stake sale process, has also set into motion the process of listing of the country’s largest insurer Life Insurance Corporation (LIC) and appointed pre-IPO transaction advisor.

The government is looking at listing the country’s largest life insurer on domestic bourses in January-March quarter of the current fiscal.

In the 2020-21 Budget, Finance Minister Nirmala Sitharaman had announced the government’s plan to sell a part of its holding in LIC by way of Initial Public Offer (IPO).

So, this fiscal, the government has not been able to sell stake in any CPSE as coronavirus outbreak has impacted equity markets. However, through Bharat Bond ETF-II the government has garnered subscription worth Rs 11,000 crore for ‘AAA’ rated bonds of CPSEs.

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Tagged air india sale, bpcl divestment, Central Public Sector Enterprises, coronavirus, Divestment plan, international flights, life insurance corporation, Strategic Disinvestment

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