India aims to raise $47bn from stake sales in state-owned firms over five years

The Indian government’s plan is to open up a steady stream of state companies to greater private investment, aiming for the kind of revenue that will be crucial to meet fiscal deficit targets. (Shutterstock)
Updated 13 July 2019

India aims to raise $47bn from stake sales in state-owned firms over five years

  • The government has set a divestment target of 1.05 trillion rupees for the current fiscal year ending March 31, 2020

LONDON: The Indian government has plans to raise as much as 3.25 trillion rupees ($47.4 billion) in the next five years by reducing its stakes in some large state-owned firms to 40 percent, two senior government officials told Reuters, in the nation’s biggest privatization push in more than two decades.
Last week, finance minister Nirmala Sitharaman in her budget announced that the government will look to reduce direct controlling stakes in some state-run firms on a case-by-case basis.
The plan will open up a steady stream of state companies to greater private investment, and target the kind of annual divestment revenue that will be crucial to meet fiscal deficit targets.
Prime Minister Narendra Modi’s administration already sold government stakes in a host of companies to raise a record $40.92 billion in his first five-year term, nearly three times the divestment proceeds of $14.52 billion achieved by the Congress party government in 2009-2014. Modi was re-elected for a second-term in a landslide victory in April-May.
The government has identified a number of state-owned firms, including explorer Oil and Natural Gas Corp, oil refiner Indian Oil, gas transmitter GAIL (India), power producers NHPC and NTPC, miners NMDC and Coal India, and Bharat Heavy Electricals, said the sources, who declined to be named due to the sensitive nature of the matter.
“We have done a calculation on current prices and we could get 3.25 trillion rupees if we bring our stake down to 40 percent in government companies, excluding banks,” one of the officials said.
The two officials, though, said that the government is yet to gauge investor appetite for the state-owned companies, and that the level of demand will be crucial to any timetable.
Analysts said the government would need to be flexible, especially given that a lot of the companies were in the resource sector and their prices would often depend on the volatility of commodities prices.
“The government should gauge investor interest and schedule an ideal timeframe that is in sync with the commodity cycle,” said Satyadeep Jain, a global metals and mining equity consultant.
Jain said the government should wait before selling stakes in companies such as Coal India as demand for its shares would be hurt by weak global coal prices. The country’s largest iron-ore miner NMDC would be a better target for sale as its stock has been buoyant this year, he said.
New Delhi wants to reduce its holdings in such a way that the cumulative stake of the government and state-owned companies such as Life Insurance Corporation (LIC) would continue to be above 51 percent.

HIGHLIGHTS

• Stake sales will open state firms to private sector.

• Many firms identified for sale are in resource sector.

• Government identifying some power firms for merger.

This year, the government is planning to put stakes in a group of companies into exchange traded funds, which would then be sold on public markets and raise at least 400 billion rupees, the officials said. The state’s stakes in those companies would be cut to 51 percent in some cases.
The government has set a divestment target of 1.05 trillion rupees for the current fiscal year ending March 31, 2020.
It is in the process of identifying some power companies for merger with a view to cutting its stakes to 40 percent, one of the sources said.
The government is planning a complex holding structure for companies such as state-owned power firm SJVN, which would be bought by another power firm such as state-owned NTPC or NHPC, sources said.
Eventually, the officials say the government would like to see its shareholdings reduced to 26 percent in some companies if the ruling Bharatiya Janata Party gets a third term.
“That step will be real privatization,” the second official said.


Etihad launches more fuel-efficient Boeing 787 Dreamliner

Updated 13 min 46 sec ago

Etihad launches more fuel-efficient Boeing 787 Dreamliner

  • Etihad’s CEO Tony Douglas described the aircraft as a flying laboratory for testing that could benefit the entire industry
  • This year, Etihad flew the world’s first passenger flight using sustainable biofuel made from a plant that grows in saltwater
DUBAI: Abu Dhabi’s flagship carrier Etihad Airways announced on Monday it is launching one of the world’s most fuel-efficient long-haul airplanes as the company seeks to save costs on fuel and position itself as a more environmentally-conscious choice for travelers.
Etihad’s “Greenliner” is a Boeing 787 Dreamliner that will depart on its first route from Abu Dhabi to Brussels in January 2020. Etihad’s CEO Tony Douglas described the aircraft as a flying laboratory for testing that could benefit the entire industry.
With fuel costs eating up around a quarter of airline spending, Douglas said the goal of the Greenliner is to be 20 percent more fuel efficient than other aircraft in Etihad’s fleet.
“This is not just a box-ticking exercise,” he told reporters at the unveiling of the initiative at the Dubai Airshow alongside executives from Boeing.
Douglas said the aircraft “not only makes sense economically from a profit and loss account point of view, but because it also directly impacts the CO2 because of the fuel burn.”
Etihad has reported losses of $4.75 billion since 2016 as its strategy of aggressively buying stakes in airlines from Europe to Australia exposed the company to major risks.
Despite its financials, the airline continues to be among the most innovative.
This year, Etihad flew the world’s first passenger flight using sustainable biofuel made from a plant that grows in saltwater. It also became the first in the Middle East to operate a flight without any single-use plastics on board to raise awareness of the effects of plastic pollution.
Aviation accounts for a small but rapidly growing share of greenhouse-gas emissions — about 2.5 percent worldwide. But forecasters expect air travel to grow rapidly in the coming years.
Etihad says it plans to make the Greenliner a “social media star” to bring under sharper focus its developments and achievements worldwide. Douglas said anything that Eithad learns with Boeing from this aircraft’s operations will be open domain knowledge “because it’s about moving the industry forward in a responsible fashion.”
“We’re like a millennial and like all good millennials, they’re really focused on the environment and the sustainability agenda,” Douglas said, referring to Etihad’s 16 years in operation.
The Greenliner will be the only aircraft of its kind in Etihad’s fleet of Dreamliners. The company currently has 36 of the 787s in its fleet with plans to operate 50.
“This is a small step today, but in a very, very long journey,” Douglas said.