Govt to snip red-tape in PSU sale approval, cut time frame by 90%

The NITI Aayog and Dipam are also considering sector-wise approval for privatisation, instead of getting clearance for individual PSUs
The NITI Aayog and the Department of Investment and Public Asset Management (Dipam) are exploring a proposal to reduce the time frame for the disinvestment process to a few months, from 12-13 months now. This includes reducing the time involved in several steps, such as appointing advisers and intimating shortlisted bidders.

The proposal, according to two government officials, is to overhaul the privatisation process which may include directly seeking the Cabinet Committee on Economic Affairs’ (CCEA’s) approval after the think tank submits its recommendations on candidates for privatisation.

“We are deliberating to reduce the time frame of the process by 90 per cent,” said one of the official privy to the plan.

Explaining the proposal, another official said the idea is to do away with the need for the approval of the Core Group of Secretaries on Divestment (CGD) for privatisation of companies, especially in non-strategic sectors. Consultation and approval by the CGD take time, leading to delays, the official said. It’s being discussed if approval from the CGD can be bypassed, he added.

Currently, the NITI Aayog identifies companies for divestment which are then considered by the cabinet secretary-led CGD. The CGD gives its suggestions to Alternative Mechanism (AM), which comprises the finance minister, the minister for administrative reforms, and the minister for roads, transport and highways. Once approved by AM, Dipam moves the proposal to obtain in-principle approval from the CCEA for strategic divestment of a PSU.

At present, strategic divestment involves around 12 steps, including identification of CPSEs for privatisation, approval of shareholding to be divested by the CCEA, selection of intermediaries, floating preliminary information memorandum, approval of bids by the CCEA, and completion of the transaction by execution of the share purchase agreement, besides adhering to Sebi guidelines in case of listed companies.

The NITI Aayog and Dipam are also considering sector-wise approval for privatisation, instead of getting clearance for individual PSUs. As there is clarity on maintaining a limited presence in strategic sectors and exiting from non-strategic sectors completely, seeking approval for privatisation of individual PSUs must be done away with, said one of the officials quoted above. Once finalised, a Cabinet note detailing the changes will be moved, he added.

Dipam has also approached the NITI Aayog to help them “sequencing” the PSUs that can be privatised or merged, and closed in both non-strategic and strategic sectors. This includes selecting PSUs for privatisation or closure based on sectoral analysis, and their timing. Strategic sectors include atomic energy, space and defence, transport and telecommunications, power, petroleum, coal and other minerals, and banking, insurance and financial services where the government intends to keep a “bare minimum” presence.

In non-strategic sectors such as hospitality and steel, among others, public sector enterprises will be either privatised or closed.

The government is also discussing trimming the current guidelines for the closure of PSUs. Shutting down PSUs takes significant time because the guidelines of the Department of Public Enterprises need to be adhered to, the first official said. There’s a lot of scope to rationalise these guidelines, he added.

The process for closure of PSUs is exhaustive, and takes over 13 months after the CCEA gives its approval. This period includes steps, such as preparatory work needed for estimation of statutory and employee dues, liabilities towards secured creditors, disposal of movable assets, and utilisation of PSU land for building public infrastructure.



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