Experts urge the Indian government to accelerate CPSE privatisation by digitising land records and enabling NLMC's active engagement with state departments. Proper documentation is vital for strategic sales and investor confidence, as legal challenges slow the process.
In order to fast-track privatisation of CPSEs, the government should promote digitisation of land documents and also empower National Land Monetisation Corporation (NLMC) officers to interact with state revenue departments for updating land records, legal experts said.
Strategic sale of a host of CPSEs, including BEML, is held up because of non-availability of proper land records, and in absence of proper documents, the government is unable to invite financial bids from prospective buyers as investors often look for proper papers before investing.
IndusLaw Partner Avikshit Moral said the government should look at the process of strategic sale from three scenarios -- availability of title documents and other information pertaining to land parcels; process of sale; and incentives that can be given to prospective buyers.
"The central government can consider empowering NLMC to appoint certain designated officers who can liaise (personally or through a third party) with the revenue officers of the state on behalf of CPSEs for obtaining/rectification/updation of revenue records," Moral said.
Since the desired skill-set to take on the responsibility of management and monetisation of non-core assets in government is limited, Finance Minister Nirmala Sitharaman in 2021-22 Budget had announced setting up of a Special Purpose Vehicle (SPV), with capacity and expertise, to carry out the monetisation of land and other non-core assets in an efficient and prudent manner.
Accordingly, NLMC was set up in 2021 to fast-track monetisation of land and non-core assets of public sector entities.
Shardul Amarchand Mangaldas & Co, Partner, Bhoumick Vaidya said strategic sale of Central Public Sector Enterprises (CPSEs) encompasses numerous challenges and legal issues including ongoing litigations against or by CPSEs, disputes on title to the lands/assets owned by CPSEs, non-availability of title documents and land records, etc which leads to an impediment in timely completion of such sale transactions.
He said land records are particularly essential to establish a clear and marketable title of CPSEs to ensure smooth closing of such transactions. While registered title documents may also be procured from the office of the relevant sub-registrar of assurances having jurisdiction, the same may be a time consuming process which may further disrupt and delay completion of sale.
"Ongoing litigations (including any property related disputes), inability to swiftly access vital information, etc. delay and discourage potential investments. The digitization of land records may be a viable solution in overcoming such challenges and fast-tracking the strategic sale process," Vaidya said.
IndusLaw's Moral further said that NLMC should consider not selling the land parcels on 'as and where is basis'.
"In cases where any litigations are pending or there is any encroachment/outstandings/missing title documents, such matters should be settled prior to holding auction so that it does not impact the ability to monetise land parcels. This will also provide comfort to interested buyers and can benefit the sale strategy," he added.
In the current fiscal, out of the budgeted disinvestment proceeds of Rs 51,000 crore, about 20 per cent or Rs 10,052 crore has been collected by way of minority stake sale via IPO and OFS.
Strategic sale of a host of CPSEs including Shipping Corporation, NMDC Steel Ltd, BEML, HLL Lifecare, are in the pipeline for completion in the current fiscal. However, demerger of core and non-core assets, and non-availability of land titles in case of most of the CPSEs delayed inviting of financial bids.
After the successful privatisation of the then loss making Air India to Tata group and NINL to Tata Steel Long Products in 2022, the government was hopeful of going ahead with more CPSEs and reach a quick conclusion. The year 2023, however, had no good news on the strategic sale front.
The difficulties involved in strategic sale process, with the involvement of multiple stakeholders, makes the task in hand a long drawn affair.
Deloitte India Partner Sanjay Kumar said higher tax and non-tax mop-up is making up for the shortfall in disinvestment proceeds.
"It is not that companies will continue to be government-owned and be inefficient because it will ultimately impact the economy... A large number of state-owned companies should be privatised subsequently," Kumar said.