The government's disinvestment plan is unable to gain any momentum even after a third of the year has ended, the focus once again has shifted to cash-rich and financially stronger central public sector enterprises (CPSEs) to initiate consolidation and merger acquisition exercise by buying government equity in companies lined up in the sell-off program.

People in know said that DIPAM (Department of Investment and Public Asset Management) may soon initiate an exercise to look at interest levels of CPSEs for consolidation and M&As and would then draw up a plan for the sale of majority government holding in both profitable and sick and loss-making companies willing entities proposing to give a good valuation, for the Centre's stake.

This, it is believed, would eliminate the need to go through a complex sell-off process with either low level of interest from investors resulting in the disinvestment exercise bearing no result at the end. Even the market offering of government shares in Covid times is fraught with risk and substantially lower valuations of continues and receipts for the government.

Sources said CPSEs may also be considered to bid for government stake in profit-making entities if a strategic sale plan involving private sector entities failed to get a response.

This could mean that if the government fails to get the desired response for sale of its equity in day BPCL, it may consider getting offers from another CPSE such as IndianOil that had earlier indicated its interest in the fuel refiner. The current terms of bids invited for BPCL bar PSUs with 51 per cent government equity to participate. The bids have been postponed thrice since May on the request of certain investors who feel that due to Covid-19 disruptions, large investments would have to be carefully weighed.

Government sources said the CPSEs driven disinvestment would be actively pursued in the energy sector where there is further scope for consolidating various entities around two or three large entities. Initiation has been done with ONGC takeover of entire government equity in HPCL and NTPC taking over other power PSUs – THDC and NEEPCO. More such consolidation may be considered involving IOC, OIL, PSU consultancy companies and power companies.

Finance Minister Nirmala Sitharaman has already indicated a big privatization and consolidation push as part of the Atmanirbhar Bharat package where CPSEs in the non-strategic sector would be privatized while those in the strategic sector would be consolidated so that the number of entities is reduced to just two or three.

The government is looking at CPSEs again to rescue its disinvestment following the examples of poor investor response to some of the strategic sale initiatives undertaken by the disinvestment earlier. In the case of Pawan Hans Helicopters Ltd (PHHL), where the government offered to sell its entire 51 per cent stake to strategic investors last year, the bidding process failed to attract any investors, forcing four extensions so far in the date for submitting expressions of interest.

Similarly, in the absence of bidders, the government may look to shut down Hindustan Prefab Ltd. rather than offering it to a strategic investor. Though the company is in the list of 28 companies where the government has given 'in-principle' approval for strategic divestment.

Sources said that the DIPAM is enthused by last year's Rs 4,800 deal struck between GAIL and an IL&FS subsidiary to take over the latter's 874 MW of operational wind projects. Also, this year NTPC acquired centers stake in other power sector PSUs – NEEPCO and THDC for Rs 11,500 crore. Earlier, ONGC successfully completed the acquisition of the government's stake in HPCL.

In strategic disinvestments in five CPSEs – HPCL, REC, HSCC, NPCC and DCIL – the tabs for which were picked up by other CPSEs like ONGC, PFC, NBCC, WAPCOS, and a public-sector consortium of ports, respectively, the government has mobilized Rs 52,828.8 crore in disinvestment receipts.

More such options would be looked at to bring several other strategic disinvestment proposals that have got delayed over lack of investor interest. In the list are 28 companies such as Scooters India, Ferro Scrap Nigam, Bridge and Roof, Hindustan Fluorocarbons, India Medicines and Pharmaceuticals, Engineers Projects, National Project construction corporation (NPCC), Hindustan Newsprint Ltd etc.

In the Union Budget for FY21, the government had set a disinvestment target of Rs 2.1 lakh crore. The target is, however, described as ambitious by many, as the Centre didn't reach anywhere near it in the last fiscal and the target got revised downwards twice. CPSEs May emerge as the savior..