There are a total of nine state-owned defence companies. Divestment is already underway for Bharat Earth Movers Ltd., where the government intends to prune its stake from about 54% to 28%.
In its response to the Defence Ministry’s suggestions, the disinvestment department said the new policy is aimed at improving domestic production “by encouraging private sector participation across all sectors by way of privatisation of public sector enterprises, which shall allow infusion of private capital, technology, innovation and best management practices….” The response was included in the final cabinet note dated Jan. 23, 2021. It emphasised that defence has been retained as a strategic sector even though 100% foreign direct investment is allowed in the defence industry and production of defence equipment is permitted within the private sector.
BloombergQuint’s email to the Defence Ministry spokesperson and message to the office of the defence minister on March 19 was not answered.
There are other departments in the strategic sectors list that raised their own concerns.
The Department of Space wrote a letter on July 24, 2020, suggesting that the two state-owned firms under its control—Antrix Corp. and New Space India Ltd.—shouldn’t be considered for privatisation. The former is facing “huge litigation with a liability of around Rs 9,200 crore” owing to an international arbitration award and the latter is “at the core of the government’s plan for opening up of the space sector, the letter said, even though the department said it was “in support of the proposal” of privatisation more broadly.
Response to an email sent by BloombergQuint to the department on Tuesday is awaited.
The Atomic Energy Department wanted two out of four firms within its administrative control to be outside the scope of the privatisation policy, according to its response dated Sept. 30. 2020. It recommended minority stake sale in a third.
In the case of NPCIL, the department said that up to 49% stake can be divested following a case specific review. For Uranium Corp. of India Ltd., the ministry viewed it as the only company engaged in mining and processing of uranium, “which is a strategic material having a bearing on national security”. For Indian Rare Earths (India) Ltd., the department argued that it be kept out of the privatisation policy “since it’s normally practiced globally that critical resources are kept under government control, based on geopolitical circumstances the country is expected to face”.
The office of the Secretary of Atomic Energy declined to comment.
In a letter to the DIPAM on Aug. 4, the Ministry of Coal pointed out that Coal India Ltd. has been facing industrial relations issues “in response to commercial mining, etc, which is affecting coal production adversely.” “It has been the stand of the Ministry that CIL and its subsidiaries are not being privatised,” the letter, which was approved by Coal Minister Pralhad Joshi, said.
The ministry made the case that since the coal sector has been thrown open for private coal mining, diluting the government’s stake in the sector “is no longer germane”. Coal has been included in the strategic sectors list.
BloombergQuint’s email to Coal Minister Pralhad Joshi and his office on March 19 didn’t elicit any response.