Modi government halting privatization, may invest in state-run firms: Reuters
What's the story
The Indian government, under PM Narendra Modi, has decided to move away from privatization plans and invest billions into struggling state-run firms, Reuters has reported.
The strategic shift includes a $1.3 billion investment plan for steel manufacturer Rashtriya Ispat Nigam Ltd (RINL) and an infusion of between $230 million and $350 million for helicopter operator Pawan Hans.
The change in strategy is partly due to political pressures and the belief that certain firms can be made profitable with proper management.
Financial rescue
Government to invest $1.5B in 2 state-owned firms
After failed attempts at privatization, the government has detailed plans to invest nearly $1.5 billion in financial rescue packages for two state-owned companies.
It has also put the privatization of at least nine state-owned units on hold amid pushback from concerned ministries.
This was revealed in a document outlining recommendations of a government panel set up to identify potential privatization candidates.
Exemption list
Companies exempted from privatization
The companies exempted from privatization are Madras Fertilizers, MMTC, Fertilizer Corp of India, and NBCC (India).
Housing and Urban Development Corporation, which was earlier identified for privatization, has now been 'exempted' meaning it won't be sold.
This change in strategy is a major departure from the government's earlier plan of reducing state involvement in business through divestment.
Fleet modernization
Government plans to modernize Pawan Hans's fleet
The government is mulling an investment in Pawan Hans, to modernize its old fleet of helicopters. This comes after four failed attempts to privatize the company.
The exact amount of investment is yet to be finalized as both outright acquisition and leasing are being considered for fleet modernization, two government sources, who wished to remain anonymous, told Reuters.
Policy success
Privatization policy sees limited success
Since the privatization policy was announced four years ago, the government has only had three success stories.
These include the sale of Air India to Tata Group, and indirect stakes in steel manufacturer Neelachal Ispat Nigam Ltd to Tata Steel, and Ferro Scrap Nigam to Konoike Transport Company.
Other major sales have either been deferred or delayed because of political pressures, complications over transfer of land holdings, etc.