New Delhi: The Modi government needs to create awareness around privatisation of state-owned banks that it’s not intended to take away jobs, but to create them, Department of Investment and Public Asset Management (DIPAM) Secretary Tuhin Kanta Pandey said.
In an interview to ThePrint, Pandey said a major issue arises if banks are not privatised, as organisations don’t change fast enough, or, don’t have enough capital to sustain the business.
“We need to create awareness that privatisation of (state-owned banks) is not intended to take away jobs. In fact, privatisation is done to increase the jobs, sustainable jobs. If the organisations do not change fast enough, they may become obsolete,” Pandey said.
To facilitate privatisation of public sector banks, Finance Minister Nirmala Sitharaman was expected to introduce legislative changes in the Winter Session of the Parliament. However, the move was put on hold after a nationwide strike of bank employees’ unions.
ThePrint had exclusively reported in December that the Modi government may now introduce these legal changes only after the five state polls ending in March as it didn’t want uproar by bank unions to influence the outcome of the elections after getting chastened by its experience with the contentious farm reforms laws.
The FM had announced privatisation of two state-owned banks in Budget 2021-22.
BPCL privatisation stuck
On the privatisation of Bharat Petroleum Corp. Ltd (BPCL), Pandey said that the bidders for the entire government stake in the company need extra resources as the size of the transaction is quite big.
On offer is the government’s 52.98 per cent stake in the state-run oil retailer, for which initial bids have already been received, including one from billionaire Anil Agarwal-led Vedanta Group.
Pandey said the government hasn’t been able to persuade bidders to make financial bids yet.
“We are not able to persuade them to make financial bids yet. We would get a better idea from them, our transaction advisors, from this (bids), and then we will take the next course of action,” he said.
As a result, the privatisation of BPCL will be now pushed to 2022-23. It is expected to fetch the government up to Rs 50,000 crore.
25% disinvestment of LIC in first 5 years
The draft red herring prospectus for the initial public offer (IPO) of Life Insurance Corporation (LIC) will be filed next week with the stock market regulator Securities and Exchange Board of India, Pandey said, adding that the IPO will be launched in March.
The government intends to offload around 25 per cent stake in LIC in the first five years from its listing, he said.
“LIC will remain under government control by law because we will always retain 51 per cent. And within the first 5 years, we will have only 25 per cent of disinvestment,” he said.
The LIC IPO is crucial for the government as it will help bridge the shortfall in the revised target of 2021-22 disinvestment at Rs 78,000 crore, as has been pegged in Budget 2022-23.
So far, the government has managed to raise Rs 12,029 crore from the disinvestment of minority stake in state-run firms and privatisation of Air India. The balance amount is likely to come from the listing of LIC.
The government has pegged the target for FY23 at Rs 65,000 crore, much lower than Rs 1.75 lakh crore it had estimated in the budget for the current fiscal.
(Edited by Amit Upadhyaya)