Change of track aided Air India, but derailed BPCL sale

Changing tracks helps. But, not taking the beaten path isn’t always helpful. This is the story of two of India’s biggest privatisations Air India and Bharat Petroleum (BPCL).

Nearly two decades after the last privatisation, a landmark divestment concluded this year when the loss-making national carrier Air India was sold to the Tatas. This was made possible only after the government changed the track from selling 76 per cent of its stake in the national carrier to putting on block its entire 100 per cent holding as well as giving bidders an option of deciding how much debt they were willing to take over.

But in the case of BPCL, the government ignored suggestions of following its time-tested policy of putting on block 26 per cent stake along with management control, just like it had done in the case of Hindustan Zinc and Balco. Instead, it offered its entire 52.98 per cent in the company operating in a sunset sector.

The result - just three bids came in, and two of them struggled to arrange for finances for the acquisition which going by current market value should not be under $10-12 bn.

So, while Air India privatisation sailed, BPCL is dragging on. Some say that if the government had offered just 26 per cent along with management control, it would have given a better value for the remainder stake once the company added value under private management.

But the biggest disinvestment in India’s history is expected in the January-March quarter of 2022 with the country’s largest insurer Life Insurance Corporation slated to come out with an initial public offer and list itself on the bourses. The Centre currently holds 100 per cent in LIC. Yet the biggest achievement of circa 2021 was shedding of the taboo that ‘family silver’ was being sold. Privatisation helps save taxpayers money gained more roots than ever before. The year 2021 was a landmark in many aspects, as it saw the first privatisation in 19 years and the Centre’s message was loud and clear with ‘government has no business to be in business’