New COVID wave, lockdowns may scupper Centre’s disinvestment plans

An insufficient revenue mop-up and not-very-encouraging growth numbers are feared to mar India’s ambitious plan to become a $5 trillion economy. To bridge the revenue gap, the Centre had been banking on key privatisation plans, such as those of Air India, Bharat Petroleum Corporation Ltd (BPCL), Shipping Corporation of India (SCI) and BEML (formerly Bharat Earth Movers Ltd). The proposed initial public offering (IPO) of the Life Insurance Corporation of India (LIC) was also projected to fill the coffers substantially.

Against ₹32,835.45 crore for fiscal year 2020-21, the Centre has set a much higher disinvestment target of ₹1.75 lakh crore for fiscal year 2021-22. But the virulent second wave of COVID, along with the strict-to-very strict lockdowns that have ensured nationwide in its wake, has severely dented the privatisation plans.

Bureaucrats affected

For one, several key bureaucrats based in New Delhi — a COVID hotspot — have fallen sick or are in various stages of isolation/quarantine due to a COVID positive family member. This has significantly slowed down the privatisation process, as critical files await clearance, media reports have indicated. Similarly, the virus has affected various legal experts, merchant bankers and transaction advisers involved in the processes.

Privatisation plans are often built around roping in foreign institutional/corporate investors, and these hinge on roadshows for their success. Now, the travel restrictions placed by several countries on India mean these plans are scuttled. Also, the foreign officials cannot visit India for face-to-face interactions with their peers here.

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Due diligence is an essential part of any privatisation, and doing it virtually is not very convincing for auditors. For instance, for BPCL, interested parties may wish to view its plants and machinery before taking a call. For Air India, the health of its aircraft is of interest to potential suits. These checks may not be possible now.

Deferred yet again

Media reports indicate that the Air India and BPCL sell-off plans may have to be postponed to early 2022. As it is, the privatisation plans have been facing severe opposition, particularly from employee unions. The staff of LIC and BPCL — apart from those of public sector banks set to be privatised — have been vociferous in their disapproval of the plan. Air India’s sell-off has been repeatedly deferred due to poor investor interest. The delays triggered by the pandemic may play further havoc with the disinvestment timelines.

The assets that might make it to the final privatisation stage, per schedule, are National Fertilizers Ltd (NFL) and Rashtriya Chemicals and Fertilizers Ltd (RCF), industry observers have noted. This is because the market appetite for agro-chemical firms remains good despite the odds, they said.