According to official sources cited in a Reuters story, the government may restructure more than 200 state-run businesses to increase profitability and veer away from the privatization program, which has encountered numerous obstacles.
The sources further stated that the new plan, which is anticipated to be revealed by Finance Minister Nirmala Sitharaman in the complete budget on July 23, entails selling substantial portions of underutilized land and monetizing other assets.
In the current fiscal year, which runs from April to March, the goal is to raise $24 billion, with the proceeds going back into state-run businesses. The government intends to create five-year output and performance goals for each company, in place of short-term targets.
One of the officials stated, “The government is focusing on boosting the fundamental worth of state-owned firms instead of selling assets arbitrarily.
For the first time in more than ten years, the administration withheld data on stake sales from the interim budget that was made public prior to the election.
The new strategy aims to prepare 230,000 managers across state businesses for senior jobs by introducing training and succession planning.
The plan calls for professional hiring for business boards and rewards for exceptional performance, and it will be put into effect starting with the fiscal year 2025–2026.
It should be recalled that the statement regarding the privatization of 2021 included plans to sell two banks, one insurance company, and businesses in the steel, energy, and pharmaceutical industries in addition to shutting down businesses that were losing money.
But the only big deal that was done was the sale of the indebted Air India to the Tata Group.
There have been difficulties with other deals, which included shares in a few other companies and a 3.5% holding in LIC.
The idea to sell Bharat Petroleum Corp. was declared to be unfeasible by Oil Minister Hardeep Puri because the company’s yearly profits were equal to the asking price.
The news agency was informed by Sunil Sinha, chief economist at India Ratings, the regional division of Fitch Ratings, that political opposition to the privatization drive existed, particularly in light of the BJP’s diminished parliamentary majority.
Notwithstanding these obstacles, expectations for sector reforms have caused the market value of state-run businesses to more than treble over the previous 12 months.
nearly the past year, the BSE PSU index—which tracks state-owned companies—has increased by nearly 100%, surpassing the 22% increase in the benchmark BSE Index.
Some experts, however, raised doubt about the high prices of many PSU equities, arguing that their current market capitalization are only justified by spectacular operational turnarounds.
The government anticipates that the reforms will result in stronger earnings and increased returns, and it sees the market’s reaction as an indication of investor confidence. Estimates for 2024–2025 show that state-owned enterprises will give the government much larger dividends; in 2024–2025, these would have increased from Rs 48,000 crore.
Experts caution that India might pass up the chance to profit from the skyrocketing valuations of state-owned businesses.
CareEdge Ratings estimated that by selling minority holdings while holding a 51% stake, the government could raise almost Rs 11.5 lakh crore at current market capitalization.
According to Rajani Sinha, chief economist at CareEdge Ratings, “the end of election season and the stock market near record highs present a perfect opportunity to advance meaningful divestment initiatives.”
