Chennai: The government has a divestment potential of Rs 11.5 lakh crore in central public sector companies, public sector banks and insurance companies at the current market capitalization.
CareEdge’s analysis based on 59 major listed CPSEs and 15 listed PSBs aånd insurance companies where the government holds more than a 51 per cent stake, finds that the government can achieve Rs 11.5 lakh crore through divestment. This can be done by the government still retaining control over the company's governance by maintaining at least a 51 per cent stake in these CPSEs and divesting excess shares.
This is a little more than twice the total divestment of Rs 5.2 lakh crore conducted since 2014. Of this, CPSEs could contribute around Rs 5 lakh crore, while PSBs and insurance firms could potentially add another Rs 6.5 lakh crore. Indian Railway Finance Corporation, Hindustan Aeronautics, Coal India, and Oil and Natural Gas Corporation are the top firms in terms of divestment potential, finds CareEdge.
After the pandemic, performance of CPSEs have improved with aggregate profits touching Rs 2.1 lakh crore in FY23. The number of loss-making CPSEs decreased from 70 in FY19 to 57 in FY23. Despite this improvement, 23 per cent of CPSEs continue to incur losses, thereby impacting the exchequer through a potential reduction in dividend transfers and the need for capital infusions.
Major CPSEs consistently making losses over the past three years include Bharat Sanchar Nigam, Mahanagar Telecom Nigam, and Alliance Air Aviation. To minimize the impact on the exchequer, the government could consider either liquidating these loss-making CPSEs or transferring their ownership to private players through divestment, thereby ensuring better management.
The divestment target for FY25 has been set at Rs 50,000 crore and achieving this target hinges on the government's ability to proceed with big-ticket divestments. After the demerger of land assets of the Shipping Corporation of India (SCI), possible divestment looks likely in FY25. Other plausible divestments include Pawan Hans and CONCOR.
