Government explores leasing out central PSEs to private sector players

NEW DELHI: The government is exploring the possibility of leasing out central public sector companies (CPSEs) or their assets to private sector players in an innovation aimed at pushing its ambitious disinvestment agenda.

A senior government official said a 99-year lease to the private sector was among the options being considered. The suggestion has been inspired by its use in the hospitality business, ensuring companies are run as private enterprises although the asset remains with the government.

“There are various models that can be put in use to maximise the disinvestment receipts,” he said. "In case of hotels, we are already looking at such a model. This can be replicated in case of some other firms as well.”

The government has budgeted a revenue of around Rs 56,500 crore from disinvestment in this fiscal, including Rs 20,500 crore from strategic sales.

The lease-out model may not be restricted to loss-making companies, the official said, adding that if a profitable firm wanted to focus on a core area it could sign such lease pacts with the private players to get ancillary support. In his February 29 budget, finance minister Arun Jaitley had said the government will look to leverage the assets of CPSEs for the generation of resources to invest in new projects.

“We will encourage CPSEs to divest individual assets like land, manufacturing units, etc. to release their asset value for making investment in new projects. The NITI Aayog will identify the CPSEs for strategic sale,” Jaitley had said.

The government has also renamed the disinvestment department as department of investment and public asset management (DIPAM) in keeping with its wider mandate of managing public sector assets. According to another government official, in case of sick units, the lease, rehabilitate and operate (LRO) model may work, especially if the lease is for a longer duration.

“It depends on the asset which is put up for auction. A lease deed can be for 10 years or more, which will be based on the interest expressed by private players,” he said, adding that auction-based leasing rights may also bring in more transparency.

Last week, NITI Aayog vice chairman Arvind Panagariya had said it was in advanced stages of identifying sick companies and whether to close them or restructure them.

Experts believe that it may not be easy to find bidders even for the lease-operate model. "If a private player is interested in some state-run firm because of its land bank, he may not go for the lease model. Besides, these decisions can always be questioned in the courts, which can derail the plan of a private firm," said MP Shorwala, a Supreme Court lawyer and independent director at a state-run firm.

Earlier this year, the Supreme Court had ordered the government to maintain status quo on the proposed sale of its residual stake in Hindustan Zinc Ltd.