Government wants CPSEs to exit loss-making state-level entities
It is set to review these investments as part of a restructuring exercise to ensure that these CPSEs are not saddled with unrelated ventures or loss-making firms.
It is set to review these investments as part of a restructuring exercise to ensure that these CPSEs are not saddled with unrelated ventures or loss-making firms, a government official who is aware of the development said. “The CPSEs can exit such investments if they do not fall in line with their investment portfolio,” he said.
Neelachal Ispat Nigam Ltd or NINL, where state-run MMTC Ltd holds 49.9% stake, is one of the firms under review. NINL is a lossmaking enterprise and requires equity infusion of Rs 1,700 crore.
In all, there are around 500 state level public enterprises (SLPEs), of which 200 are loss making.
“We had a look at some firms, but it will be best if administrative ministries and their CPSEs work this out taking into account the functioning and role of the concerned firms,” the official said, adding there were about six such firms, of which some are making marginal profits.
The government may not directly get any divestment proceeds from such a stake sale, but the move is expected to help CPSEs re-balance their portfolios. “They can use it for investment in new ventures rather than being saddled with historical investments,” said a finance ministry official.
If the state governments are willing, then they can buy out the CPSE’s stake or opt for strategic sale to private firms, he said.
An executive at a CPSE, however, said investment decisions should be left to the company’s board. “The government, on the one hand, wants CPSEs to exit these ventures, while it forced four-state owned ports to buy Dredging Corp,” he said.
In March, the government sold its 73.47% stake in Dredging Corp to Vishakapatnam Port Trust, Paradeep Port Trust, Jawaharlal Nehru Port Trust, and Deendayal Port Trust.
Some of the investments made by CPSEs in the past were due to political reasons, said MP Shorawala, a former independent director with Container Corp.
“If these investments are loss making, there is no point in infusing capital, but care should be taken to ensure that any further investments be backed by financial strength and resource optimisation,” he said.
The government has set a disinvestment target of Rs 90,000 crore for the current fiscal. In 2018-19, it raised Rs 84,972.16 crore in disinvestment proceeds against the budgeted Rs 80,000 crore.