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Stake sale target will be met in 2017-18: Bibek Debroy

Stake sale target will be met in 2017-18: Bibek Debroy
Sometimes you might want to reduce the equity because equity contribution varies, Debroy says. Photo by Ankit Kumar.
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Even as consecutive governments have failed to meet their disinvestment targets, Bibek Debroy, member, Niti Aayog is confident that the targets will be met this time. Speaking to InfraCircle, Debroy, architect of the government’s new disinvestment plan says the stake sale story in 2017-18 will be different from 2016-17. Here are the excerpts from the interview:

It has been a struggle for the government to achieve disinvestment targets. This time the target has been fixed at Rs.72,500 crore. What is the roadmap?

There are several things I have to say because the Central Public Sector Enterprises (CPSEs) belong in different baskets and one needs to treat them differently. It’s not as if tomorrow I decide that and I am going to sell them off. Many of these CPSEs do not own but possess land and much of the value is perceived because of the land. In most cases, the land belongs to the state government and is available with CPSEs on lease. The popular perception is that CPSEs are sitting on valuable land and it should be sold off. If there’s anyone who can sell it off, it’s the states. One step is to get a complete inventory of the land that CPSEs possess. Find whom that land belongs to, how much land is under litigation and how much of it has been encroached upon. One example is Heavy Engineering Corporation (HEC) in Ranchi. Large part of the land has already been encroached upon.

Then you have those CPSEs where already a revival plan exists due to intervention of courts or quasi-judicial forums. Then you have cases in courts that are not linked to revival but to labour laws. Then you have situations where you want to sell the land… but to whom? Sometimes you might want to reduce the equity because equity contribution varies… in some cases it’s more than 90% and in others it’s less than 50%. So maybe you get better value by reducing it less than 50% before you sell it off.

Lastly, there might be a division whether the PSU is listed or not. In any case, all PSUs should be listed.

I personally think, because you made a reference to the historical figures, that in 2017-18 you will see a structural break in extrapolating those past figures for the very simple reason that our reports were submitted in the last few months. Therefore, 2017-18 will be different from what happened in 2016-17 purely in terms of the figures.

Will the government be able to meet the disinvestment target?

The target is a function of which CPSE you are disinvesting. For example, if I have four large ones and I can push that through, it will be reasonably easy to accomplish the targets. But if it is 40 small ones, I may or may not be able to move close to the target. But I am fairly optimistic that with a few big sales, one will be able to achieve the target.

Normally, the most controversial ones have been the strategic sale ones. Because most of these, one must appreciate, one cannot sell off through a global tender. That’s controversial because of valuation. Valuation becomes extremely difficult a company is not listed, which is why I mentioned listing earlier and because of problems associated with valuing land.

 

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