Air India, Bharat Petroleum & Other PSUs Will Be Sold To Private Firms In 2022; Govt Is Determined

Finance Minister Nirmala Sithraman said on August 12 that the Modi government has committed to reaching the Rs 1.75 lakh crore divestment objective for 2021-22.

Sitharaman stated at the annual conclave of industry body Confederation of Indian Industry (CII) that the government is dedicated to privatising companies such as Air India, Bharat Petroleum, BEML, Shipping Corp, Container Corp, and others this year.

The Union Budget for 2021-22 has a divestment target of Rs 1.75 lakh crore, the majority of which will come from privatisation and the LIC IPO.

“We have shown that our privatisation and divestment initiatives are policy-driven, and not discretionary in any manner. This policy-driven privatisation will continue with the same fervour,” Sitharaman said.

Weak Performance Of State Banks

Sitharaman had also announced that two state-owned banks and a general insurance company will be privatised this year.

According to Fitch, the present privatisation proposal is part of the government’s larger strategy to restructure the Indian banking system and lower the number of state-owned banks, which has decreased from 27 in 2017 to 12 in 2020 following three rounds of consolidation.

“State banks can also be difficult to manage. They have a significantly different culture and organisational practices (eg more bureaucratic) relative to private banks. Similar challenges and the absence of meaningful investor interest resulted in the state ultimately having to sell its majority stake in IDBI Bank to LIC in 2019, which has somewhat been privatisation in letter but not in spirit.

“However, this could change in 2021 if both government and LIC can divest a majority stake in the bank to an external investor, as it may be indicative of broader investor appetite in state banks with adequate loan-loss reserves.”

Privatisation And Divestment Initiatives Are Policy Driven!

Sitharaman stated at the CII event just a week after introducing the Taxation Laws Amendment Bill in the Lok Sabha that the government had been waiting for the arbitration and tribunal processes relating to retrospective tax to be completed.

“Once they reached a conclusion, we set to work. We were waiting for Monsoon Session to repeal the retrospective tax,” she said. Both Houses of Parliament have cleared the Taxation Laws Amendment Bill, which seeks to end the nine-year-old retrospective tax.

“For us it is not a case of inflation versus growth. We will attend to inflation and take the necessary steps. But growth is also something we continue to focus on. It is growth which will improve people’s lives and create jobs,” she said.