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Ever since the finance minister (FM) announced in her budget speech that the government will privatise a couple of banks and a general insurance company in the coming financial year, speculation has been rife about the possible candidates for disinvestment. There has been another major announcement, that of raising the limit for foreign direct investment (FDI) in insurance to 74% which will, indeed, have a far-reaching impact on the insurance landscape in India. The rise in FDI cap merits a separate assessment; this article attempts to examine the likelihood of success of the privatisation effort.
What is not clear from the announcement is the reason for taking this step. Is it merely to meet the Budget deficit, or is this the outcome of a paradigm shift that the government has no business to be in business? Or the decision to privatise is driven by the government’s inability or unwillingness to keep pumping more and more capital in government-owned general insurance comp
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The government’s decision to move from pseudo-privatisation to an actual sell-off, amounting to relinquishing of control, has triggered celebrations on the stock market. Shares of the four banks, assumed to be privatised immediately, hit upper circuits. Privatising chronically sick, money-guzzling public sector undertakings (PSUs) is, indeed, a good thing, especially in sectors where the government has no business being in business. A broad policy framework, classifying PSUs into strategic and non-strategic, preceded the decision to sell or close 151 non-strategic ones. But there is no clear roadmap of how this will be done and most information in the public domain is from ‘source’-based news reports.
On December 22, DIPAM, the government’s asset sale department, invited expressions of interest to privatise Shipping Corporation by selling the government’s 63.75 per cent stake to a strategic buyer. DIPAM had set a 13 February date for potential bidders to file their interest. Government officials briefed on the move said the deadline is also being .
The government is believed to have shortlisted ICICI Securities (I-Sec) and Goldman Sachs as merchant bankers from among 11 firms to manage the sale of its 26.12 per cent stake in Tata Communications