An Air India plane on the runway in Mumbai. Photo: AFP / Himanshu Bhatt / NurPhoto

After Indian Finance Minister Nirmala Sitharaman announced plans to sell stakes in many state-owned enterprises, the government has now come out with a timeline to execute it. While presenting the Union Budget in Parliament on Monday, the minister had said that strategic disinvestment of Air India, Bharat Petroleum Corporation, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam Ltd, among others, and the initial public offering (IPO) of Life Insurance Corporation would be completed in 2021-22.

The Department of Investment and Public Asset Management, which manages government’s equity in state-owned companies, has formulated a divestment calendar that includes completing the sale of state-owned airline Air India and oil marketing firm Bharat Petroleum within the first half of the next fiscal.

The IPO of the country’s top insurer Life Insurance Corporation is likely to take place after October this year. Department secretary Tuhin Kanta Pandey told the Press Trust of India that the government has introduced the legislative amendments required for disinvestment of a stake in Life Insurance Corporation of India and IDBI Bank through the Finance Bill, 2021 presented along with the Budget on Monday.

It has already selected actuarial firm Milliman Advisors for ascertaining the embedded value of Life Insurance Corporation, ahead of the IPO. Deloitte and SBI Caps have been appointed as pre-IPO transaction advisers.

The privatization process of Air India, Bharat Petroleum, Pawan Hans, BEML, Shipping Corp, Neelachal Ispat Nigam, and Ferro Scrap Nigam is ongoing, but the pandemic-induced slowdown had been a dampener in the past.

As for the status on Air India and Bharat Petroleum disinvestment, Pandey said, “We are on course.” The three stages of the strategic disinvestment process are expression of interest, due diligence and share purchase agreement, request for proposal, and then closing of the transaction. “We are in the due diligence stage now. Within the first half (by September 2021) of next fiscal we expect the closure of Bharat Petroleum, Air India, and Shipping Corp transactions,” the secretary added.

The Narendra Modi government aims to raise 1.75 trillion rupees (US$24 billion) in order to finance projects aimed at reviving the pandemic battered economy. It is targeting record capital expenditure next fiscal and the additional resources required for that are to be raised through divestment and monetization.

The countrywide lockdown to arrest the spread of coronavirus had taken a heavy toll on the Indian economy. In the first quarter, the gross domestic product had contracted to a record 23.9%, followed by a contraction of 7.5% in the second quarter. The Reserve Bank of India is expecting an annual contraction of 7.5%, while the National Statistical Office has pegged it at 7.7%.

However, it may be noted that even before the pandemic the country’s economy was not in a good shape. India’s gross domestic product growth has been on the decline since Q4 FY17, and in the last quarter of FY20, it was a mere 3.1%.