The government has set itself a divestment target of Rs 90,000 crore for the current fiscal
The government has asked central public sector enterprises (CPSEs) to review their investments in loss-making state-level companies, according to a report by The Economic Times.
The government, which has set itself a divestment target of Rs 90,000 crore for the current fiscal, wants to ensure CPSEs are not burdened with unrelated or loss-making state level public enterprises (SLPEs).
“The CPSEs can exit such investments if they do not fall in line with their investment portfolio,” a government official told the newspaper.
Moneycontrol could not independently verify the news.
Around 200 out of the roughly 500 SLPEs are currently loss-making, the report said. “We had a look at some firms, but it will be best if administrative ministries and their CPSEs work this out, taking into account the functioning and role of concerned firms,” an official told the paper.
The government is looking at about six SLPEs where CPSEs can reduce their stake, the article quoted a source as saying.
One of the companies under review is Neelachal Ispat Nigam (NINL), where state-run MMTC holds a 49.9 percent stake.
The Centre might not directly receive proceeds from such stake sales, but the move will help CPSEs restructure and balance their portfolios. “They can use it for investment in new ventures rather than being saddled with historical investments,” an official from the Finance Ministry told the newspaper.
State governments can choose to purchase the CPSEs’ stakes or choose to sell it to a private buyer, the official added.
Political reasons have driven some of the investment decisions by CPSEs in the past, MP Shorawala, a former independent director with Container Corporation of India (Concor), told the newspaper.“If these investments are loss making, there is no point in infusing capital, but care should be taken to ensure that any further investments be backed by financial strength and resource optimisation,” Shorawala stated.Subscribe to Moneycontrol Pro and gain access to curated markets data, exclusive trading recommendations, independent equity analysis, actionable investment ideas, nuanced takes on macro, corporate and policy actions, practical insights from market gurus and much more.