Government's privatisation push in danger of being delayed to next fiscal

The government's ambitious privatisation drive may be in danger of getting pushed into the next financial year. A status check by CNBC-TV18 shows the process for most privatisation candidates is stuck at one stage or another.

We are five months into the new financial year and there has been very little movement in this very important February 2021 announcement on bank privatisation made by the Union Finance Minister. The cabinet has yet to take up the banking law amendments for privatisation and the bill did not fit in the government’s legislative agenda for the monsoon session.

This is fueling concerns now that the entire agenda of public sector bank privatisation could actually be pushed to 2024 when, after the elections, a fresh call could be possible.

The understanding so far was that the monsoon session of parliament was a window to get the bank privatisation bill in, giving the government a clear one-year window before the general elections in 2024 to initiate some serious work on this front.

Now the bill can still be tabled in the winter session in November. But given the political climate, nothing is for certain.

The delay is keeping shareholders of the two NITI Aayog recommended candidates, Central Bank and Indian Overseas Bank, on the edge. The share price of Central Bank was around Rs 21 sometime in June last year. It's now currently trading around Rs 18.

Similarly, IOB was around Rs 21 last year, it's now below Rs 18. However, IDBI’s privatisation still holds out hope. But like all strategic stake sales, this is also slow-moving.

Despite a cabinet nod in May last year, expressions of interest (EoI) have yet to be invited. It has been given to understand the government will probably do so by next month and in that case, the transaction is likely to spill over to the next financial year.

Now in the cases of BEML and SCI, the EoI has come in back in March 2021. But so far, financial bids have not been invited. That's because both companies are going through a demerger process and till that settles, calling for financial bills does not make sense.

So the government is tentatively planning to do this by early next year. But the question is, will the original set of bidders be still interested?

Even smaller transactions like Pawan Hans and Central Electronics are stuck. In both cases, bidders were approved and the deal closed before litigation struck. However, there is some hope that the Pawan Hans deal may be salvaged but Central Electronics still has a question mark over it.

The other big hope was Bharat Petroleum Corporation Ltd (BPCL), which has been kind of shelved due to an insufficient number of financial bids. So one can safely discount that for now.