Disinvestment gains traction

Recently, Finance Minister Nirmala Sitharaman announced that the disinvestment of Bharat Petroleum Corporation Limited (BPCL) would be completed by March 2020.

She has also set similar deadline for the sale of Air India. As she rightly said, the stake sale in the two companies holds key to the Modi government's target of mopping up Rs 1.05 lakh crore through disinvestment in the current fiscal.

So far, the Centre raised Rs 17,364.26 crore this financial year. It is imperative for the government to achieve the disinvestment target by next March to keep fiscal deficit under control so that it can avoid the wrath of global rating agencies which are ready to downgrade India's sovereign rating if the country's fiscal math gets derailed.

Any further downgrade from existing ratings will for sure scare away global investors.

As per the current stock price, the central government's 53.29 per cent stake in BPCL, which has four crude oil refineries and over 15,000 petrol pumps, is valued at Rs 60,000 crore.

So, the prospective buyer will have to shell out Rs 60,000 crore for the govt's stake and another Rs 30,000 crore for acquiring additional 25 per cent stake from public through an open offer.

That means the value of BPCL stake sale transaction will be over Rs 90,000 crore. This amount will further go up if the Centre demands any premium on its stake. Barring Reliance Industries, no other Indian private company has the resources to bid for the country's oil major.

As Mukesh Ambani's Reliance is keen on diversifying from its core oil refinery business, it may not evince interest in picking up BPCL.

Therefore, the government must lure global energy giants with an attractive offer. Saudi Arabia's oil giant Aramco, whose world's biggest IPO is presently underway, may be keen on the oil major as it has been looking for avenues to expand its presence in India.

Some other global oil majors including Total, which are eyeing the lucrative the Indian market, may also jump into the fray.

But the Modi government may not find many suitors for Air India. The 73-year-old national carrier is neck-deep in losses and sitting on a debt-pile of around Rs 58,000 crore.

It reported an operating loss of a staggering Rs 4,600 crore last fiscal. Further, the govt's attempt last year to offload 75 per cent stake in the airline failed as no company came forward to submit bids. Centre owns 100 per cent stake in the airline.

The disinvestment process in the airline will inch forward if it turns operationally profitable this fiscal as claimed by official circles.

Other PSUs in divestment list for this fiscal include Concor and Shipping Corporation. It is to be seen whether the Centre will succeed in selling stake in all PSUs it listed for disinvestment this fiscal.

But the bottom line that governments have no business to be in business. It is more so when the competitive forces are deciding the fate of business entities. It is very unlikely that govt-owned companies will be capable of competing with market forces.

So, it's better if the government exits from all businesses and companies except those which are of strategic importance.