Privatization and Disinvestment : News & Discussions

_Anonymous_

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If done by the same finesse that this government has shown in the other areas, there is a significant probability that it will run most of the OFB to the ground.
Perhaps that's the intention. If you look at the clusters, the functions of Ammo & Explosives, materials & components & ordinance equipment group of factories can easily be taken up by the pvt sector without having to wait for privatisation of these clusters , if not immediately then within a span of a year at the most. Not that the other clusters can't be replicated but the threshold in terms of technology employed of the aforementioned 3 clusters is too low a barrier.

Besides which pvt sector in their right minds would take over a GoI enterprise with a bloated staff strength & pay them handsome wages.

By opting for a strike, that too at a time like this they've dug their own graves. If Modi responds like how KCR did to the state transport strike, there's not going to be an iota of sympathy whatsoever for these specimens.
 
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Ashwin

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randomradio

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There's really not much to say. There are some strategic sectors where govt presence is required for a decade or more at the minimum. These are areas where presence is more important than quality, like energy, banking, insurance and communications. Even food and transportation. So these sectors have to keep running even when making losses. Mainly those that support our agriculture sector.

All other areas where quality is more important than presence can be sold off. Like most DPSUs won't be able to compete with the private sector within the decade anyway, then there's mining, construction, textiles, engineering, culture, retail etc. Basically everything the private sector can run on its own.

Later on even strategic sectors can be diluted as the market becomes mature enough to allow private sector to thrive on domestic demand alone.
 

Ashwin

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A total of 92,300 employees at state-run Bharat Sanchar Nigam Limited (BSNL) and Mahanagar Telephone Nigam Limited (MTNL) have opted for voluntary retirement scheme (VRS) offered by the central government. While more than half of the employees at BSNL have opted for VRS, close to 80 per cent of those employed at MTNL have chosen the retirement scheme.

At BSNL, 78,569 of the total 1,53,000 employees have opted to retire. Of the 18,000 employees working for MTNL, 14,400 have opted for VRS, reported The Indian Express. Most of the employees of BSNL who have opted for the VRS are learnt to be in the non-executive category and in the age group of 55-60 years. Any employee above 50 years of age was free to opt for the VRS pacakge.

The government brought in the VRS option for employees of the two bleeding telecoms as part of measures to merge the two entities. The VRS plan, which will cost the government Rs 70,000 crore, will significantly bring down the cost of wage bills of these firms. In fact, BSNL claims that its wage bill be reduced as much as 50 per cent post VRS, while it will come down by about 75 per cent for MTNL.

First, let's do a back-of-the-envelope calculation of the average employee salary. As per BSNL sources, the telco's monthly salary budget is about Rs 1,200 crore that means that the average employee salary is Rs 75,000 per month. Being a PSU, the difference in the salaries of employees at BSNL might not be as wide as a private sector company - considering that the previous chairman and managing director of the telco Anupam Shrivastava was drawing a remuneration of Rs 2.43 lakh per month, which is just over three times the average salary at the telco.

So, if an employee at the age of 50 years is opting for the scheme; assuming that this employee is earning Rs 75,000 per month, which is the current average salary, the total entitlement of this person would be whopping Rs 90 lakh. That's because this person still has 10 years of service left, and with an average annual salary of Rs 9 lakh that they are earning now, it would add up to some Rs 90 lakh of lumpsum payment. Similarly, an employee who is currently aged 59 years would get about Rs 9 lakh, which is just short of a million in rupee terms.

But that's not all. BSNL sources confirm that these retiring employees will also be eligible for gratuity, earned leave and monthly pension after they cross 60 years of age. "The salary of the retiring employees would be protected. As per the cabinet decision, they will get the full salary," says a BSNL source.

"The ex-gratia component of VRS will require Rs 17,169 crore, in addition, the government will be meeting the cost towards pension, gratuity and commutation," a PIB note said last month.

The other sick PSU telco MTNL, which is going to be merged with BSNL, has also rolled out an identical VRS scheme for its employees but the scale at which BSNL would be retiring its employees is unprecedented. BSNL, which is estimated to have posted losses of about Rs 14,000 crore in 2018/19, has reduced its workforce considerably over the years. Yet, its staff cost is over 75 per cent of the total income. That is set to change after the wholesale retirement, and hopefully lead the PSU in the right direction. For an organisation that has suffered from the bloated workforce and lack of competitive intensity, this is perhaps the last shot to get into shape.

Can't even imagine the level of inefficiencies of the system !. Basically means even if you let go 60+% of the employees the PSU will work fine. So many lazy, jobless rent-seeking bozos were employed for no reason. This is a 'farm loan waiver' for the upper-middle class. There are still more than 60,000+ of them. And top it off their market share is less than 10%.

Private companies like Airtel,Jio, or Idea all have a permanent employee strength of less than 20,000 !.
 

Milspec

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There's really not much to say. There are some strategic sectors where govt presence is required for a decade or more at the minimum. These are areas where presence is more important than quality, like energy, banking, insurance and communications. Even food and transportation. So these sectors have to keep running even when making losses. Mainly those that support our agriculture sector.

All other areas where quality is more important than presence can be sold off. Like most DPSUs won't be able to compete with the private sector within the decade anyway, then there's mining, construction, textiles, engineering, culture, retail etc. Basically everything the private sector can run on its own.

Later on even strategic sectors can be diluted as the market becomes mature enough to allow private sector to thrive on domestic demand alone.
Except most of these companies are not making losses. Over the years, the subsequent governments are just siphoning off money and destroying the competitiveness of these companies. Like take Coal India for example, the company has a complete monopoly over the sector but look at its debt.
1604294165845.png

Cola India's Debt 5 years ago was 408cr, 3yrs ago 3014cr, and now 6434cr in 5 years it's debt has grown 15 times, but not it's revenue or it's bottom line. Goi Owns 66% and LIC another 11.1%. Given a market cap of 70378 cr, and a price of 114, total equity would be 613cr shares and GoI owns about 404.58 cr shares. With record dividends of 125%, 95%, 133%, 146%, at 10rs face value from 2014 to 2018, GOI extracted 5057 cr, 3843.51cr, 5380.9cr and 5906.86 cr respectively. Government extracts dividends from coal India all the while it's made to borrow at high interest when it really doesn't need to. Most ridiculous was 2018 where it's bottomline was 9280 and paid dividend of 5906cr.

1604294009912.png


Going back to to @Ashwin 's post, The market cap of of coal india has shrunk by 280% the stock that traded at 300 + levels is now sitting at 114.

And the modus operandi of the GoI is different for different sectors, some cases OPM's are killed by tarrifs, some cases reserves are siphoned off , others due's are not paid, no hirings to energise the workforce, dilapadated infrastructure, no clearences for investments.

PSU's that were flush with case and zero debt could work with zero operating costs just based on interests earned, now they have been reduced to debt laden entitites. If the government is not capable of running PSU, sell them now at fair value or all of them will end up like Air India.
 

Milspec

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Can't even imagine the level of inefficiencies of the system !. Basically means even if you let go 60+% of the employees the PSU will work fine. So many lazy, jobless rent-seeking bozos were employed for no reason. This is a 'farm loan waiver' for the upper-middle class. There are still more than 60,000+ of them. And top it off their market share is less than 10%.

Private companies like Airtel,Jio, or Idea all have a permanent employee strength of less than 20,000 !.
let's not get ahead of ourselves, One of the primary functions of PSU, when they were set up, was to provide employment to the Indians, and also with piss poor salaries for the first 6 decades, these inefficiencies were by design. The salary that GoI paid to it's PSU's was pretty much free labor for years of top-line growth. It's no different from British Rule on India, PSU's built by Public Risk and Taxes, Entire bottom line siphoned off by the government, and created low paying jobs with non-existent training/ Professional growth and a company ghetto dubbed "township" perpetuated by the idea of job creation. The way PSU's have been operated since the beginning has been a big government cash cow.
 

randomradio

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Except most of these companies are not making losses. Over the years, the subsequent governments are just siphoning off money and destroying the competitiveness of these companies. Like take Coal India for example, the company has a complete monopoly over the sector but look at its debt.
View attachment 18535
Cola India's Debt 5 years ago was 408cr, 3yrs ago 3014cr, and now 6434cr in 5 years it's debt has grown 15 times, but not it's revenue or it's bottom line. Goi Owns 66% and LIC another 11.1%. Given a market cap of 70378 cr, and a price of 114, total equity would be 613cr shares and GoI owns about 404.58 cr shares. With record dividends of 125%, 95%, 133%, 146%, at 10rs face value from 2014 to 2018, GOI extracted 5057 cr, 3843.51cr, 5380.9cr and 5906.86 cr respectively. Government extracts dividends from coal India all the while it's made to borrow at high interest when it really doesn't need to. Most ridiculous was 2018 where it's bottomline was 9280 and paid dividend of 5906cr.

View attachment 18534

Going back to to @Ashwin 's post, The market cap of of coal india has shrunk by 280% the stock that traded at 300 + levels is now sitting at 114.

And the modus operandi of the GoI is different for different sectors, some cases OPM's are killed by tarrifs, some cases reserves are siphoned off , others due's are not paid, no hirings to energise the workforce, dilapadated infrastructure, no clearences for investments.

PSU's that were flush with case and zero debt could work with zero operating costs just based on interests earned, now they have been reduced to debt laden entitites. If the government is not capable of running PSU, sell them now at fair value or all of them will end up like Air India.

I don't know much about the coal sector so its difficult to comment on it.

But I find it interesting that the govt absorbed more money in terms of dividends during Coal India's slow years while during the boom years the dividend payouts were really low. I mean look at 2019 and 2020. So it merely appears the govt takes its pound of flesh even during the slow years and the company compensates the difference with debt.

Also, I think encouraging some PSUs to take debt they do not need had to do with managing the NPA crisis.

I don't think CIL has dilapidated infrastructure. They spend a lot on capex. They should have a mix of modern and old.

And they are dumping workers, which is a good thing for a PSU.
 

Ashwin

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let's not get ahead of ourselves, One of the primary functions of PSU, when they were set up, was to provide employment to the Indians, and also with piss poor salaries for the first 6 decades, these inefficiencies were by design. The salary that GoI paid to it's PSU's was pretty much free labor for years of top-line growth. It's no different from British Rule on India, PSU's built by Public Risk and Taxes, Entire bottom line siphoned off by the government, and created low paying jobs with non-existent training/ Professional growth and a company ghetto dubbed "township" perpetuated by the idea of job creation. The way PSU's have been operated since the beginning has been a big government cash cow.
BSNL is not a pre-liberalisation company which was set up to give employment. Its was founded in 2000. Its peer Airtel was founded in 1995. None of the reasoning you gave can be applied here. And these are not 'low paying jobs' by any standards. It baffles me how can the company a 20-year company has two-third of the staff aged 50+. A lifetime of rent-seeking doing nothing.

If anything it was set up by design to fail and extract most out of taxpayers' money. The only positive that a telecommunication PSU can bring to the table was serving underdeveloped and sparsely populated areas. Is that worth enough billions burned yearly? That gap should be filled by incentivisation of market forces. Like the case of UDAN scheme for Air travel.

Except most of these companies are not making losses. Over the years, the subsequent governments are just siphoning off money and destroying the competitiveness of these companies. Like take Coal India for example, the company has a complete monopoly over the sector but look at its debt.
View attachment 18535
Cola India's Debt 5 years ago was 408cr, 3yrs ago 3014cr, and now 6434cr in 5 years it's debt has grown 15 times, but not it's revenue or it's bottom line. Goi Owns 66% and LIC another 11.1%. Given a market cap of 70378 cr, and a price of 114, total equity would be 613cr shares and GoI owns about 404.58 cr shares. With record dividends of 125%, 95%, 133%, 146%, at 10rs face value from 2014 to 2018, GOI extracted 5057 cr, 3843.51cr, 5380.9cr and 5906.86 cr respectively. Government extracts dividends from coal India all the while it's made to borrow at high interest when it really doesn't need to. Most ridiculous was 2018 where it's bottomline was 9280 and paid dividend of 5906cr.

View attachment 18534

Going back to to @Ashwin 's post, The market cap of of coal india has shrunk by 280% the stock that traded at 300 + levels is now sitting at 114.

And the modus operandi of the GoI is different for different sectors, some cases OPM's are killed by tarrifs, some cases reserves are siphoned off , others due's are not paid, no hirings to energise the workforce, dilapadated infrastructure, no clearences for investments.

PSU's that were flush with case and zero debt could work with zero operating costs just based on interests earned, now they have been reduced to debt laden entitites. If the government is not capable of running PSU, sell them now at fair value or all of them will end up like Air India.
I dont think GoI is doing anything largely intentional here. Partly this is the downfall time for the legacy industries like power and oil. ONGC and Coal india contributed most to the total loss here.

 

Milspec

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BSNL is not a pre-liberalisation company which was set up to give employment. Its was founded in 2000. Its peer Airtel was founded in 1995. None of the reasoning you gave can be applied here. And these are not 'low paying jobs' by any standards. It baffles me how can the company a 20-year company has two-third of the staff aged 50+. A lifetime of rent-seeking doing nothing.

If anything it was set up by design to fail and extract most out of taxpayers' money. The only positive that a telecommunication PSU can bring to the table was serving underdeveloped and sparsely populated areas. Is that worth enough billions burned yearly? That gap should be filled by incentivisation of market forces. Like the case of UDAN scheme for Air travel.


I dont think GoI is doing anything largely intentional here. Partly this is the downfall time for the legacy industries like power and oil. ONGC and Coal india contributed most to the total loss here.

Mcap will be diluted, look at coal India, ONGC, IOCL, Oil India, HPCL, BHEL, Punjab National Bank, Bank of Mah, Ind Ov Bank, all of them, market cap on an average has been reduced 200 to 300%
 

Milspec

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BSNL is not a pre-liberalisation company which was set up to give employment. Its was founded in 2000. Its peer Airtel was founded in 1995. None of the reasoning you gave can be applied here. And these are not 'low paying jobs' by any standards. It baffles me how can the company a 20-year company has two-third of the staff aged 50+. A lifetime of rent-seeking doing nothing.


Also BSNL might have been incorporated in 2000 by GoI, but it is one of the oldest companies of India it existed before as the dept of telecom.
 

Ankit Kumar

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Other companies in line for privatisation include: Shipping Corporation of India, BEML, Neelachal Ispat Nigam Limited, Container Corporation of India and Pawan Hans, among others. The government has received financial bids for Pawan Hans and Neelachal Ispat Nigam, and the privatisation process has moved to its concluding stage.