Budget 2015: States owning PSU land may get selloff share

NEW DELHI: The central government may agree to share revenues with states in some cases of strategic sale of loss-making firms where the land bank available with public sector units is owned by the state government, a senior official said. The government has already identified about 18 such non-viable firms where it can possibly shed its stake, the official said on the condition of anonymity.

"There are some loss-making PSUs where land bank is available but on lease from the state government. If we agree to share proceeds, the state governments will be more agreeable to come on board regarding strategic sale," the official said, explaining the motivation on part of the Centre to explore the revenue sharing model with the state governments concerned.
The total land available with loss-making PSUs is estimated at about 2.5 lakh acres, some of which is in metros, including Mumbai and Delhi. Finance Minister Arun Jaitely had said budget reflects considerable scaling up of disinvestment figures. "This will include both disinvestment in loss-making units, and some strategic disinvestment," he said.

The NDA government had in its earlier stint sold four loss-making entities, including two hotels. While Modern Food Industries was sold to Hindustan Lever, Paradeep Phosphates was bagged by Zuari Industries.

"As of now, we are looking at loss-making PSUs. Once you settle the political issues around the firm, we expect more participation from private players," the official said. The ministry of heavy industries has already floated a Cabinet note with regard to closure of six companies – Hindustan Photo Films, Tungbhadra Steel, Hindustan Cable, HMT Bearings, HMT Chinar Watches and HMT Watches.

Last year, the Cabinet had cleared an “improved” voluntary retirement scheme in Central Inland Water Transport Corporation, which was to be followed by disinvestment. Of the Rs 69,500 crore target for the next fiscal, the government has budgeted Rs 41,000 crore through stake sales in PSUs and the balance Rs 28,500 crore through strategic disinvestment, including residual stake sale in Hindustan Zinc and Balco.

Experts, however, are not convinced about achieving the target through disinvestment of loss-making units. "The past performance of various governments does not instil confidence about actual realisation of the target," said Ranen Banerjee, partner-public finance at PwC India. The 14th Finance Commission had identified 88 central public sector enterprises that qualify to be non-priority and deserving of relinquishment. "The output of these 88 enterprises is insignificant while the union government has to devote attention to supervising them," it said, adding that the route of transparent auctions be adopted to generate sufficient private sector interest.