A customer withdraws a stack of Indian twenty rupee banknotes at a branch (Photographer: Dhiraj Singh/Bloomberg)

State-Run Firms May Have To Create SPVs To Monetise Non-Core Assets

India may ask state-owned entities to create special purpose vehicles to house their non-core assets for monetisation, according to a senior government official who didn’t want to be identified.

Under the institutional framework being considered by the Department of Investment and Public Asset Management, public-sector companies may have to move land holdings and other non-core assets into these SPVs, the official said.

The entities would include state-run companies identified for strategic disinvestment where the government is willing to cede control. The existing framework laid out to carve out non-core assets didn’t suggest a way forward, according to the official. The new mechanism is expected to help close strategic sales, the official said.

BloombergQuint had reported earlier that the government is working on a policy that may nudge public-sector companies to monetise non-core assets. It would be similar to the mechanism that requires state-owned enterprises to pay a minimum dividend to the government every year.

Once the new policy is put in place, assets moved to the SPVs can be automatically monetised, the official quoted earlier said. The framework would also nudge asset-heavy state-run enterprises to monetise assets, the official said.

The government is mulling the criteria to select the assets and if the administrative ministry does it or another body should be handed the task, the official said, adding that it may rope in the NITI Aayog. A draft note would be circulated among ministries for consultation.