Government plans to revive strategic sale model for PSU disinvestment

Government is thinking to revive strategic investor model to procure money from the sale of PSU shares. Strategic sale means government transferring control of the PSU to the private sector strategic investor by selling majority shares. The exercise will be made only for loss making PSUs in non-strategic sectors.

The plan for strategic sale is out of compulsion as many PSUs are incurring losses and at the same time, budgetary targets related to disinvestment are not realized.

But at the same time, such an exercise need more vigil as the SC has heavily criticized the way in which it has implemented in the Hindustan Zinc Limited’s (HZL) disinvestment case in January this year.

In HZL, the government has tried to sell the residuary share of 29.5% to strategic share holder Vedanta to garner around Rs 17,300 crore. 

In the case, the court has ruled that sale of HZL to Vedanta in 2002 was against the Metal Corporation (Nationalisation and Miscellaneous Provisions) Act, 1976, and hence further disinvestment need Parliament’s approval.

Despite the Court’s observations, government sources indicate that the feasible way to procure money from loss making enterprises is strategic sale.

For that government is thinking about the appointment of a committee to look into the matter. The high powered committee may comprise people outside the bureaucracy and also including a Supreme Court judge.

Current estimates shows that non-realisation of disinvestment target may reduce the quality of the current years’ budget. The target of Rs 69500, which was one of the highest in history, is an underperforming target as the fund mobilized till now is around Rs 13000 crores.