Government approves strategic disinvestment of BPCL, 4 other PSUs
The government will sell its 53.29% stake in BPCL after taking out Numaligarh refinery from its portfolio.
Based on current market prices, the sale of stakes in these three firms will fetch the Modi government about Rs 78,400 crore, taking it close to the disinvestment target for the fiscal year.
The cabinet committee on economic affairs (CCEA), which met under the chairmanship of Prime Minister Narendra Modi, also cleared the sale of its entire stake in Tehri Hydro Development Corp of India and North Eastern Electric Power Corporation (Neepco) to NTPC.
The CCEA also gave in-principle clearance to the reduction of the government’s stake in select public sector units to 51%, “while retaining management control on case-to-case basis, taking into account the government shareholding, and the shareholding of government-controlled institution,” according to a release.
“Post such reduction, government’s control will remain intact and, while retaining the management control, on a case-to-case basis decision will be taken,” finance minister Nirmala Sitharaman told reporters after the cabinet meeting.
These companies will be shortlisted by officials and detailed approvals to be sought later.
The government proposes to raise Rs 1.05 lakh crore from disinvestment in the current financial year. It had exceeded asset-sale targets of Rs 1 lakh crore in FY18 and Rs 80,000 crore in FY19. In the current fiscal year, by the end of September, the government had only raised Rs 12,359 crore through disinvestment.
At current market value, the government can raise about Rs 63,000 crore from selling its entire 53.3% stake in BPCL, Rs 2,000 crore by offloading 63.7% in Shipping Corporation of India and Rs 13,400 crore from selling 30.8% of Concor.
The actual realisation from BPCL could be much higher on account of the control premium the government will seek from any strategic investor. Big international oil companies including Saudi Aramco are said to be keen on investing in BPCL, given the refiner’s strong presence in fuel retailing among other things.
The BPCL strategic sale will not include the 61.7% stake the company holds in Numaligarh Refinery Ltd. This will be offered to a public sector entity in the oil and gas sector.
Shares of the three companies had risen on the BSE today. Shipping Corporation went up 9.3% to Rs 68.35, BPCL advanced 4.9% to Rs 544.65 and Concor was up 1.79% to Rs 578.
Sitharaman indicated that the strategic sales could happen soon.
The government will retain a 24% stake in Concor given that it is “integrally linked” with Indian Railways. “We don’t really have a very competitive market as yet in this area so therefore it is important government retains stake but this is less than 26%. Therefore there is no veto thing,” said Tuhin Pandey, secretary, Department of Investment and Public Asset Management (DIPAM). “We intend to make it clear that management control will be unencumbered as far as (a) strategic buyer is concerned.”
The Taxation Amendment Bill, which was also approved by the cabinet, will replace the September 20 ordinance that had cut corporate tax rate cut to 22%, without any incentives and holidays, and instituted a new 15% rate for greenfield manufacturing. The bill also proposes certain changes to the Income Tax Act, beyond the ordinance, to provide greater clarity on the lower tax regime.
These include explicit provisions to clarify that the 15% corporate tax rate will not be available for entities carrying out software development as that doesn’t count as manufacturing. Also, accumulated minimum alternate tax credit cannot be claimed by those opting for lower tax regime of 22% without incentives.