India to ditch privatisation plans, pour billions in state-run firms, sources say

Steel Authority of India

27/01/2025 10:58

* 
      India planning to pour in $230-350 mln in ailing Pawan
Hans,
sources say
    

        * 
      Government announced $1.3 bln plan to revive steel
producer
    

        * 
      Privatisation plans of 9 state-run firms on hold,
according to
document
    

        * 
      Government mopped up $998 million via stake sales in
2024/25
    

  
    By Nikunj Ohri and Sarita Chaganti Singh
       NEW DELHI, Jan 27 (Reuters) - Indian Prime Minister
Narendra Modi is pouring billions into ailing state-run firms
after slowing ambitious divestment plans that were intended to
reduce the role of the state in business, according to
government sources and a document reviewed by Reuters. 
    Less than a month into 2025, New Delhi has plans to invest
about $1.5 billion in financial rescue packages for two
state-owned firms after failing to sell them to private
companies. 
    It has also decided to put in "abeyance" privatisation of at
least nine state-owned units after opposition from relevant
ministries, according to a document that detailed
recommendations of a government panel set up to identify
privatisation candidates. The document, reviewed by Reuters, did
not cite reasons for the decision.
    The nine companies include Madras Fertilizers  MDFT.NS ,
Fertilizer Corp of India, MMTC  MMTC.NS  and NBCC (India)
 NBCC.NS , the document showed. 
    Housing and Urban Development Corp  HUDC.NS , that was also
identified for privatisation, has now been 'exempted' implying
it will not be sold, according to the document.
    Among the state-owned companies being revived with
government funding is helicopter operator Pawan Hans.
    The government is planning to infuse around $230
million-$350 million in Pawan Hans to modernise its aging fleet
of helicopters after four failed attempts to sell the company,
two government sources said.
    The amount of infusion is still being finalised as the
options being considered for fleet modernisation include both
outright acquisition and leasing, one of the sources said.
    The sources declined to be identified because of the
sensitivity of the issue.
    India's finance and civil aviation ministries did not
immediately reply to e-mails seeking comment on the
privatisation plans or on the Pawan Hans investment.
    The fund infusion in Pawan Hans and plans to halt the
privatisation of nine firms have not been previously reported.
    In 2021, Modi's government announced a major programme to
privatise most of India's state-run companies. The plan was so
drastic that even in the four sectors that India sees as
sensitive, such as telecoms and banking, it wanted to keep only
a minimum presence, while exiting from all other sectors.
    But now it is planning rescue and revival plans for
companies even outside the sensitive sectors. 
    Last week, the government announced a $1.3 billion plan to
revive debt-laden steel producer Rashtriya Ispat Nigam Ltd
(RINL). 
    The government has also allocated 80 billion rupees in
2024/25 for bond repayments of state-run telco MTNL that has
seen a series of defaults lately, according to budget documents
for the current year. 
    
    PRIVATISATION SLOWDOWN
    Four years since the privatisation policy was announced, the
Modi government has had only three successes, out of which Air
India's sale to the Tata Group was the largest. The other two
were indirect holdings in steel-maker Neelachal Ispat Nigam Ltd
to Tata Steel  TISC.NS  and Ferro Scrap Nigam to Konoike
Transport Co  9025.T .
    Other large sales have either been deferred or delayed.
    The U-turn in policy was partly driven by the expectation
that some large state-owned firms could be overhauled and made
more profitable, helping the government earn dividend income,
Reuters has reported previously.
        Political pressures on Modi have increased after he came
back to power in mid-2024 only with the help of regional allies,
making it more difficult to overcome opposition to 
privatisation by employee unions fearing job losses.
  
        The sale of state refiner Bharat Petroleum Corp
 BPCL.NS  was rolled back in 2022 after failing to get suitors.
The ongoing privatisation of Shipping Corp of India  SCI.NS  and
BEML  BEML.NS  has been stuck for years due to complications
over transfer of land holdings. The government has also been
dragging its feet on the sale of a majority stake in IDBI Bank
 IDBI.NS . 
    In previous years, privatisation formed an important part of
the government’s plan to reduce its budget gap. But with the
federal fiscal deficit seen falling to a more comfortable 4.9%
of GDP in the 2024-25 year, the fiscal push for divestment has
waned. 
    New Delhi is expected to miss its internal stake sale target
of 180 billion to 200 billion rupees in 2024-25 (April-March)
for the sixth straight year. As of January, government has
mopped up 86.25 billion rupees via stake sales in 2024/25.
    ($1 = 86.4250 Indian rupees)

 (Reporting by Nikunj Ohri and Sarita Chaganti Singh; Editing by
Ira Dugal and Raju Gopalakrishnan)
 ((nikunj.ohri@thomsonreuters.com; +91 90284 60730; Reuters
Messaging: twitter.com/nikunj_ohri))