Indian Govt Might Stop Privatization; Massive Investment Can Be Done In PSUs


Radhika Kajarekar

Radhika Kajarekar

Jan 30, 2025


According to government sources, the government of Indian Prime Minister Narendra Modi has changed its emphasis from aggressive divestment to reviving faltering state-run businesses.

Following unsuccessful attempts at privatization, New Delhi intends to provide roughly $1.5 billion in financial rescue packages for two state-owned businesses in early 2025.

Indian Government To Revive Faltering State-Run Businesses

According to the recommendations of a government panel, plans to privatize at least nine state-owned businesses, including MMTC, NBCC (India), Fertilizer Corp of India, and Madras Fertilizers, have been put “in abeyance.”

Housing and Urban Development Corp (HUDC) will not be sold because it has been exempted from privatization. 

After four unsuccessful attempts at privatization, the government is now planning to invest $230 million to $350 million in modernizing the helicopter operator Pawan Hans’ aging fleet. The precise amount of funding for Pawan Hans’ fleet modernization has not yet been decided, but options include leasing or outright purchase.

The Modi administration announced a massive privatization plan in 2021 with the goal of minimizing the state’s involvement in business, including delicate industries like banking and telecommunications.

In spite of this previous policy, the government is now supporting rescue plans for businesses that are not in the sensitive industries, indicating a change in approach.

The government announced a $1.3 billion plan last week to revive the indebted steel manufacturer Rashtriya Ispat Nigam Ltd (RINL).

Government Sets Aside ₹80 Billion For Bond Repayment

After a string of defaults, the government has set aside ₹80 billion ($1 billion) for bond repayments for state-run telecom operator MTNL in 2024–2025.

Only three major sales, including the sale of Air India to the Tata Group, have been completed since the policy’s announcement, indicating the limited success of Modi’s privatization drive.

There have been delays or issues with other privatization initiatives, including the sale of Bharat Petroleum Corp (BPCL), Shipping Corp of India, BEML, and IDBI Bank.

The slowdown in privatization has also been impacted by the belief that restructuring a few major state-owned companies could increase profitability and produce dividend income for the government.

Since the federal fiscal deficit is expected to drop to 4.9% of GDP in 2024–2025, there are fewer fiscal incentives for privatization, which lessens the need to raise money through stake sales.

After collecting ₹86.25 billion as of January 2025, New Delhi is likely to fall short of its internal stake sale target of ₹180 billion to ₹200 billion for the sixth year in a row.

Due to complications like land transfer issues, large privatizations like those of Shipping Corp and BEML are still on hold.

In 2022, the sale of Bharat Petroleum Corp. was canceled because no buyers were found.

The government’s updated approach reflects an attempt to address difficulties in the privatization process while striking a balance between political, economic, and social factors.

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Radhika Kajarekar
Radhika Kajarekar
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