Cabinet Decisions: Government To Sell Stake In BPCL And Four Other PSUs, Defers Telecom Spectrum Payments

The Union Cabinet has approved strategic divestment of its stake Bharat Petroleum Corporation Ltd. and four other public sector units. It has also provided relief to the financially stressed telecom sector by deferring spectrum auction payments for two years.

Finance Minister Nirmala Sitharaman said that the government’s 53.29 percent stake in BPCL will be sold to a strategic buyer, along with transfer of management control. This will exclude BPCL’s stake in the Numaligarh Refinery in Assam. That stake will be retained by the government.

• The government will also divest its 64.45 percent stake, along with management control in Shipping Corporation of India.
• It will sell 30.8 percent stake, along with management control in Container Corporation of India. The government will retain 24 percent stake in Concor.
• Other than that, the government will sell THDC India Ltd. and North Eastern Electric Power Corporation Ltd. to NTPC Ltd.

Telecom Relief

In view of the financial stress faced by major telecom service providers and based on recommendations given by a Committee of Secretaries, the Cabinet has approved:

• To defer receipt of the spectrum auction instalments due from telecom operators for the years 2020-2021 and 2021-22.
• These deferred amounts will be equally spread over the remaining instalments to be paid by the telecom operators without any increase in the existing time period specified for making the instalment payments.
• The interest as stipulated while auctioning the concerned spectrum will, however, be charged so that net present value of the payable amount is protected.
• A telecom operator, opting for the two-year deferment, will provide the government with a financial bank guarantee of the revised annual instalment payable for 2022-23.

Watch Nirmala Sitharaman announce the Cabinet decisions here.

The Cabinet has approved a unified authority to regulate all financial services at the IFSC, GIFT City In Gujarat.

Eight regulatory organisations including RBI, SEBI and PFRDA will all be brought together regulate financial services. All eight will have a unified window under one chairman. They shall, in one place, govern all activities in IFSC.

The Cabinet has approved that the National Highway Authority of India may monetise public-funded national highway projects which are operational and have been collecting toll for one year.

Earlier, only those highways which have been collecting toll for two years can be monetised.

NHAI also gets authorised to vary the concession period between 15-30 years depending on the project's features. Earlier, this was for 30 years.

The highway builder has also been authorised to raise long-term finance from banks by securitising the user fee receipts from toll plazas as an alternate mode of asset monetisation.

Finance Minister Sitharaman said that in cases where government entity has challenged the arbitral award, and as a result, the amount of an arbitral award has not been paid, 75 percent of the award will be paid by the government entity against a bank guarantee.

Apart from BPCL, the Cabinet also approved strategic divestment of other state-run firms. These are:

• Shipping Corporation of India: 64.45 percent stake along with management control.
• Container Corporation of India: 30.8 percent stake along with management control.
• Government stake in THDC India Ltd. will be given to NTPC Ltd.
• North Eastern Electric Power Corporation Ltd. too will be sold fully to NTPC.

The Cabinet has approved a strategic divestment of the government’s 53.29 percent stake Bharat Petroleum Corporation Ltd. divestment to a strategic buyer, along with transfer of management control. This will exclude BPCL’s 61 percent stake in Numaligarh Refinery in Assam. That stake will be moved out of BPCL before the disinvestment and retained by the government.

The Cabinet Committee on Economic Affairs will take up the proposal to privatise oil refiner-retailer Bharat Petroleum Corporation Ltd. and sell controlling stake in Container Corporation of India Ltd., North Eastern Electric Power Corporation Ltd., THDC India Ltd., and Shipping Corporation of India Ltd.

The Modi administration has already sought transaction advisers for the sale of these companies.

There is a possibility of government selling its 53.29 percent stake in BPCL along with management control in oil marketing and refining firm for about $10 billion (around Rs 70,900 crore), a top government official had said.

Bloomberg had earlier reported that the government is considering a plan to sell the nation’s second-largest state refiner and fuel retailer to a global oil company as it explores options to give up its controlling stake in Bharat Petroleum, citing people with knowledge of the matter.

Offloading its holding in Bharat Petroleum can help meet more than 40 percent of the government’s fiscal aim based on the closing price on Sept. 12.

IOC Stake Sale

The government also plans to reduce its stake in Indian Oil Corporation Ltd. to below 51 percent while ensuring it retains control of the nation’s largest oil refiner, people with knowledge of the matter told Bloomberg.

India directly holds 51.5 percent in Indian Oil, and another 25.9 percent through state-run Life Insurance Corporation of India, and explorers Oil & Natural Gas Corporation Ltd. and Oil India Ltd.

Others

Apart from IOC, the Cabinet will consider a strategic sale of the biggest power producer NTPC Ltd. Other companies on the list include Bharat Electronics Ltd., BEML Ltd., MOIL Ltd., Engineers India Ltd., GAIL (India) Ltd. and National Aluminium Company Ltd.

The mop-up from public sector undertakings’ stake sales assumes significance against the backdrop of the corporate tax cuts, which will cost the government Rs 1.45 lakh crore in revenue in the ongoing financial year. This also raises questions whether India will be able to achieve its fiscal deficit target for 2019-20. This also comes at a time when India’s GDP growth fell to its lowest in six years.

Just yesterday, the government categorically stated that it does not intend to revise its fiscal deficit target of 3.3 percent of gross domestic product for the current financial year notwithstanding slowdown in economic activity.

India’s Union Cabinet is set to meet today where it may decide on selling stakes in public sector units and central public sector enterprises, in an effort to garner more revenue to meet fiscal goals.