Modi dumps privatization plan after valuation spike, poll pain

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Report says Modi govt will drop privatization plan in Budget

By Our Special Correspondent

New Delhi, July 12: Prime Minister Narendra Modi-led National Democratic Alliance (NDA) government has dumped the privatization agenda as per a report of Reuters. The government’s privatization agenda had been stalled for several years.

The lack of a decisive electoral mandate after the Lok Sabha polls may have further dampened the privatization resolve of the government. The ruling Bharatiya Janata Party (BJP) lost a majority of own in the Lok Sabha, becoming dependent on allies to stay in power at the Centre.

Reuters claimed in its report that the Union Budget to be unveiled on July 23 will propose steps to strengthen the public sector units. The report reiterated the past ways of the government to stress on land monetization to gain capital for infusion back in the PSUs to restore them to competitive health.

The NITI Aayog had drawn a list of the PSUs for downright sell. But the government despite commanding a strong majority in parliament had not been able to move an inch on the privatization roadmap.

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Except for Air India, the Modi government’s track record on privatization has been dismal. Even the low-hanging fruits such as Balmer Lawrie could not be sold off amid valuation tussle between the management of the PSU and the officials in the government.

The government had also sought to privatize the likes of Bharat Petroleum, Shipping Corporation of India, Container Corporation of India, and others. “The privatization efforts were stalled for lack of appetite from the private entities. They wanted to buy the PSUs at throwaway prices,” said a senior official in the government.

Compounding the problem of the government to find buyers for the PSUs listed on the privatization roadmap, their share prices have galloped in the last 18 months to record levels, making them costlier for any suiters. The BPCL share price was trading at about ₹150 in October 2022. The share price of the oil PSU is now trading at ₹306.

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The valuations on the basis of the share prices of the likes of Shipping Corporation, Container Corporation, and others have made them costlier in the last 18 months. Privatization of such companies at lower valuation than their market capitalization would have brought a blowback of political attacks from the Opposition for Modi.

Even the share price of Balmer and Lawrie, which had been counted as a low-hanging fruit for privatization, has risen 100 per cent in the last one year. “The private companies may not shell out money at current valuations, and the government now cannot sell them at discounts,” added the official.

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