A memorandum issued by the department of investment and public asset management (DIPAM) to all ministries and government departments said that central, state or joint public sector enterprises, state governments and government-controlled cooperative societies are not permitted to participate in strategic disinvestment or privatization of PSUs, unless specifically approved by the central government.
The department said transferring management control from the government to another government organization will be against its public sector enterprise (PSE) policy which aims to minimize its presence in PSEs.
Several state governments have asked the Centre for permission to participate in bids for central PSEs that have been put up for strategic divestment, under which the government sells all its shares and transfers management control to a private entity.
Recently, the Kerala government wrote to Prime Minister Narendra Modi, asking that profit-making HLL Lifecare Ltd, located in Thiruvananthapuram, be given to the state or a state-run PSU.
Chief minister Pinarayi Vijayan sought the first right to hold the assets and land of the public sector unit and cited principles of cooperative federalism as the grounds for allowing the state government to join the bidding.
The state proposed that its unit, Kerala State Industrial Development Corp. (KSIDC), participate in the bidding, but this was not allowed.
Vijayan contended that the preliminary information memorandum for the sale did not explicitly say that the state government or its entities were not allowed to participate.
A similar issue surrounds the sale of Rashtriya Ispat Nigam Ltd (RINL), which has a steel plant in Visakhapatnam.
Andhra Pradesh chief minister Y.S. Jagan Mohan Reddy wrote to the prime minister in February asking to reconsider the decision, saying the state government was ready to work with the steel ministry to protect the PSE that provided employment to 20,000 people directly and many more indirectly.
Employees of the plant have also opposed the strategic sale.
According to a central government official familiar with the matter, the debt position of the states and the weak profit-making abilities of the state-run PSUs did not make for a strong case for the CPSEs to be given to states.
“States themselves do not have the funds to turn around their own PSUs, so their arguments on being given other assets that can be privatized do not hold any water," the official said, asking not to be named.
In the office memorandum issued this week, DIPAM reiterated its policies on the matter and the new PSE policy.
