The Narendra Modi-government on Sunday opened the floodgates to privatisation, leaving it prey to charges of handing over valuable public assets to private parties at a time that Covid-19 pandemic has made mincemeat of valuations.

The Centre announced a new policy for companies under state control, saying PSUs in non-strategic sectors will be privatised while those in the identified strategic sector would be capped at four, with the rest to be merged or sold.

“We would like to announce a PSU policy (as) a self-reliant India needs a coherent policy. All sectors will be opened to private entities. PSUs will continue to play an important role in defined areas,” finance minister Sitharaman said.

She said a list of strategic sectors requiring the presence of PSUs in the public interest would be notified.

In strategic sectors, at least one enterprise will remain in the public sector but the private sector will also be allowed.

In other sectors, PSUs will be privatised, she said, adding the timing would be based on feasibility.

“To minimise wasteful administrative costs, the number of enterprises in strategic sectors will ordinarily be only one to four. Others will be privatised/ merged/ brought under holding companies,” she said.

Eminent economist Pronab Sen said “why come up with the privatisation of non-strategic public sector enterprises now. If any firm is privatised, it would be a financial transaction, which otherwise could have been used in capacity expansion and provided demand”.

He said the valuation of the firms would be significantly lower than their potential value. “It would be like selling them as scrap.”

Finance ministry officials said most of the privatisation would happen in the next fiscal year.

The country has been trying to divest parts of state-run companies in sectors ranging from aviation to power to fill up its coffers, but poor investor sentiment and limited demand have crippled its efforts.

States must have a say

D.K. Srivastava, chief policy advisor, EY India said: “The policy regarding PSUs should be finalised in consultation with the states since there are a large number of state-level PSUs.”