Finance minister Nirmala Sitharaman on Sunday announced a new public sector enterprise (PSE) policy under which there will be at least one state-run company in strategic sectors while PSEs in non-strategic sectors will be privatized.
In her final tranche of announcement of the stimulus, Sitharaman said India needs a coherent policy on PSEs, wherein they will play important roles in defined areas. She said the Centre will soon announce the details of the policy, listing strategic sectors that require the presence of PSEs in public interest.
“In strategic sectors, at least one enterprise will remain in the public sector but private sector will also be allowed. In other sectors, PSEs will be privatized,” she added. The timing of privatization of PSUs will be based on feasibility. To minimize administrative costs, number of enterprises in strategic sectors will be one to four, she said. “Others will be privatized or merged or brought under holding companies.”
This opens the possibility of further consolidation of the 12 public sector banks.
A senior official at a state-owned bank said there are five banks that were not part of the consolidated plan. “Looks like the government is keen to continue with its consolidation plan in the banking sector, though there has been no official word on it. Lenders such as Bank of India are reasonably big and can absorb weaker banks.”
Dipti Lavya Swain, corporate M&A lawyer and partner, HSA Advocates, said,“What will be strategic and what not will be a key decision that the government will have to take since there are many sectors where PSEs continue to be financially distressed.”
