It was touted as a game changer but big-ticket privatisation has been a mixed bag as the government faces unanticipated challenges of lukewarm investor response, employee union agitation and legal hurdles.

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Prime Minister Narendra Modi's often-repeated statement 'the government has no business to be in business' guided the drawing up of an ambitious privatisation pipeline. While Air India sale succeeded, Bharat Petroleum Corporation Ltd (BPCL) divestment failed.

Tata Group acquired debt-ridden Air India last year but the government had to call off two transactions -- BPCL and SAIL's Bhadrawati Steel Plant --- due to lack of buyer interest, and terminated the strategic sale of Central Electronics Ltd (CEL) as the successful bidder was disqualified for non-disclosure of pending legal cases.

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The sale of Pawan Hans too is in limbo as the successful bidder has a pending NCLT case against it.

The government in the current fiscal (April-December) has raised about Rs 31,100 crore from CPSE (Central Public Sector Enterprise) disinvestments as against the full-year budget target of Rs 65,000 crore. In the last four years, the government has missed the disinvestment target set in the budget by a wide margin.

More than half of the proceeds raised so far from disinvestment came from the Initial Public Offering (IPO) of Life Insurance Corporation (LIC). The government sold a 3.5 per cent stake at Rs 949 per share, helping the government raise Rs 21,000 crore.

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The scrip, however, got listed at Rs 872. Since the listing, LIC share price has remained lower than the IPO issue price and is currently trading at around Rs 659 apiece.

Considering the fact that there is little scope for further minority stake sales in bluechip PSUs (Public Sector Undertakings) and the problems in executing strategic sale transactions, the government needs to set realistic disinvestment targets in budgets, sources said.

The biggest test in 2023 would be the strategic sale of IDBI Bank where the government and LIC together are selling about 61 per cent stake, out of the current holding of 95 per cent. The sale would fetch around Rs 30,000 crore to the exchequer at the current market price.

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Next year, one of the challenges before the government would be to go ahead with the strategic sale of Rashtriya Ispat Nigam Ltd (RINL) or Vizag Steel, where the privatisation move is being vehemently opposed by employee unions.

Although the government has been narrating the turnaround success story of NINL, which was bought by Tata Steel Long Products for Rs 12,100 crore earlier this year, RINL privatisation still remains a challenge as employees demand it be given to a PSU company.

The sources said that in case the government fails to privatise RINL, it may have to be closed down in a couple of years because of mounting losses.

In 2023, the government is likely to conclude the strategic sales of Shipping Corporation, Concor, BEML, NMDC Steel and HLL Lifecare.

The major ones like SCI, Concor and BEML are in the process of demerging their non-core businesses following which financial bids would be invited from interested buyers.

Deloitte India Partner & Leader - Government & Public Services Arindam Guha said investor interest is primarily dependent on specific factors like ring-fencing of the CPSEs' existing liabilities, its attractiveness in terms of sector of operation, existing customer base/ assets/ facilities, pass through mechanism for any rights from the administrative ministry if applicable.

"Transaction structure plays a key role in determining the time frame. For example, any merger or demerger requires approval from multiple authorities, thereby requiring significant time whereas an asset or business sale may take lesser time. It is therefore important to opt for a structure which minimises time for the sale," Guha said.

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