India's PSU consolidation strategy finally falling into place

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26 Aug, 2025 12:21

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Sidhartha Shuklamoneycontrol.comThe NDA government under Atal Bihari Vajpayee was the first one to kickstart divestment and privatisation in a big way.The return of the NDA, this time under Prime Minister Narendra Modi, has seen the government taking a different -- some would say more cautious -- approach to loss-making public sector companies: consolidation.One saw a glimpse of the government's strategy finally falling into place after earlier this month, the government proposed the merger of State Bank of India (SBI) with its five associate banks, along with Bhartiya Mahila Bank.The move may not have gone down well with employees, who have already threatened to strike but there's more to come.Recently, Minister of State for Finance Jayant Sinha went on record to say the government's longer-term goal was to merge all the 27 public sector banks into eight to 10 mega banks.Not to mention, the government has already announced a bold decision to virtually privatise state-run IDBI Bank.

The government's aim to consolidate India's burgeoning landscape of public sector companies goes beyond banks: other weak state-run enterprises are on the plate for divestment or consolidation too.

According to an Economic Times article today, the government is preparing a roadmap for restructuring lossmaking central public sector undertakings (CPSEs) and all options, including mergers and shutdown, are on the table.The move follows a report by NITI Aayog, which suggested ways for the government to unlock value from assets, including by looking at strategic sales.In a rare instance of a government company taking over another, the Cabinet last week approved the takeover of Hindustan Steelworks Construction with NBCC.This is not to say that consolidation is the only trick up the government's sleeve: the political hot potato of outright sale too is not out of bounds.Recently, the Ministry of Tourism announced that 14 out of 16 lossmaking hotels owned by India Tourism Development Corporation (ITDC) will be sold.

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