Why is PSU privatisation in limbo?

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The government’s exit or closure plan by selling stake in 176 Central Public Sector Enterprises (CPSEs) seems to be in limbo. The plan to close down or privatise loss-making government PSU companies is stuck. In the budget presented for the financial year 2022, the government had decided to privatise or shut down 176 government companies. So far the government has achieved no major success in this direction. Some ministries are opposing privatisation of PSUs coming under its jurisdiction. In some cases, the officials have raised objections. It is feared that the government will not succeed in this endeavour before the next year’s Lok Sabha elections.

What is the plan? In the budget of FY 2022, the government had come up with a policy that 176 CPSEs in the non-strategic sector would either be privatised or completely shut down. But due to its opposition within the government and the inability of the top leadership to take any clear decision, this plan is currently stuck.

According to media reports, it is unlikey that there will be any change until after the Lok Sabha elections in 2024. The current government will hardly be able to take any decision in this matter. If we look at the 60 companies that have been identified for disinvestment in the initial phase, then there is only progress to some extent in the steel sector. There is no progress in other sectors.

Opposition to privatisation Officials of many departments including the Ministry of Chemicals and Fertilizers are opposing the privatization of CPSEs under them. The opposition parties are also opposing the privatization plan of the central government. However, the government has been looking firm about privatisation or disinvestment. Even before this, the government has been constantly away from the target of disinvestment. But this time one of the reasons for not showing interest in privatisation or disinvestment is because the government is getting huge revenue through GST.

NITI Aayog’s suggestion The Department of Public Enterprises (DPE) and NITI Aayog had identified 176 such public enterprises in non-strategic sectors and said that about 60% of these should be closed and the rest privatised. Both these institutions have suggested that only eight companies necessary for public welfare should remain in the government sector. Nine public enterprises are to be privatised under the Ministry of Fertilizers, but according to sources, many senior officials of the Ministry are opposing the move.