PSUs asked to route strategic divestment, minority stake sales via DIPAM

The process for strategic divestment will be through competitive bidding, while soon-to-be specified guidelines will have to be followed for shutting down units

The Union government has asked public sector undertakings (PSUs) to submit their proposals regarding strategic divestment and minority stake sales to the Department of Investment and Public Asset Management (DIPAM) through its administrative ministry.

Last month, the Union Cabinet had empowered boards of PSUs to suggest and undertake the process for strategic disinvestment, minority stake sale, stake in joint ventures (JVs), and closure of any of their subsidiaries.

In a communication, government departments and ministries have been informed that PSUs should submit their proposals on strategic or minority stake sale, sale in JVs and closure of units to DIPAM through their administrative ministry.

DIPAM will then take ‘in-principle’ approval for the proposal from the Alternative Mechanism (AM) that comprises Finance Minister Nirmala Sitharaman, Minister of Roads, Transport, and Highways Nitin Gadkari, and the minister of administrative department of the PSU.

Besides empowering boards of PSUs to take up divestment-related proposals, the Cabinet had also authorised alternative mechanisms to grant in-principle approval for such proposals.

The boards of about 10 Maharatna PSUs — the highest rated public sector companies — already have powers to suggest minority stake sale in subsidiaries that would continue further.

The process for strategic divestment would be through competitive bidding, while soon-to-be specified guidelines will have to be followed for shutting down units. For divestment of PSUs where expression of interest (EoI) has already been floated, DIPAM would continue with its current process.

The powers delegated to PSU boards to recommend stake dilution, exiting JVs and subsidiaries, among others, are seen reforming their functioning through greater autonomy. Timely exits from investment in units or JVs will help monetise their investment and shut loss-making and inefficient units. In line with the government’s public sector enterprises (PSE) policy announced in 2021, vesting such authority to PSU boards would further delegate powers, and help in quick decision making.

Additionally, according to the present PSE policy — which seeks to minimise government’s presence through PSUs —the NITI Aayog identifies candidates for privatisation in strategic sectors, which include energy, telecom, power, banks, among others. And DIPAM seeks approval from the Core Group of Secretaries on Divestment (CGD) headed by Cabinet Secretary. After approval from CGD, the proposal is placed before AM for its nod. Final approval is sought from the Cabinet Committee on Economic Affairs.

For non-strategic sectors, including steel, hospitality, tourism, urban development, health care, among others, where the Centre is looking to privatise or close PSUs, a Committee of Group of Officers (CGO), chaired by the NITI Aayog CEO, identifies PSUs for privatisation, and the Department of Public Enterprises seeks in-principal approval for privatisation of identified PSUs from CCEA.