India: Centre set to miss divestment target yet again

  • Of Air India’s total debt of INR615.6bn, Tata Sons’ holding company Talace Pvt Ltd would take over just INR153bn or 25% of the debt.
  • Rest of the debt, INR462.6bn, would be transferred to Air India Assets Holding Ltd (AIAHL), a special purpose vehicle, wrote The Hindu. It is clear that when it came to taking over an ailing airline, the Tatas had played hardball.
  • The government had set out with a privatisation target of INR1.75tr in FY22. So far, the government has managed to mop up around 5% of this target, or INR93.3bn, data from the Department of Investment and Public Asset Management (DIPAM) website shows (the proceeds do not include the privatisation of Air India and Central Electronics).
  • This marks the third straight year that the NDA government has failed to hit its divestment target.
  • The strategic disinvestment of the following companies was to be completed in the ongoing fiscal: BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam Limited, among others.
  • Other than IDBI Bank, two public sector banks and one general insurance company were to be privatised. The initial public offering (IPO) of Life Insurance Corporation of India (LIC) was to come through.
  • Central Public Sector Enterprises (CPSEs) except in four strategic areas were to be privatised while NITI Aayog was to work out on the next list of CPSEs to be taken up for strategic disinvestment.
  • Reports suggest that big-ticket divestments such as BPCL and IDBI are unlikely to happen in FY22. Pawan Hans may garner INR3.5bn-INR4bn while BEML and SCI may together fetch INR36bn if the divestment is done this financial year.
  • In a Lok Sabha response back in Dec 21, the government said that it has received expressions of interest for BPCL. “The timeline is dependent on the successful outcome of different stages of the transaction.” The completion might just spill over to the next fiscal.
  • Divestment of two players in particular, largely, would take the government closer to its target, BPCL and LIC.
  • The LIC IPO, the biggest ever, is expected to hit the bourses in Mar 22. The Centre is eyeing INR800bn-INR1tr, diluting around 5-10% stake. It appears to be a mammoth task, but if reports are to be believed, the Centre is working on facilitating factors that would help a successful listing of the insurer and thereby closing the gap on its privatisation target.

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