Take cue from Temasek model for disinvestment: Survey

The government should take a cue from the experience of Singapore's Temasek Holdings Company to lend professionalism and autonomy to the disinvestment programme, the Economic Survey 2019-20 said on Friday.

The Temasek Holdings was incorporated by Government of Singapore in 1974, as a private commercial entity, to hold and manage its investments in its government-linked companies (GLCs).

It manages a net portfolio of over $230 billion as on March 31, 2019 around fourfold jump from $66 billion in 2004. Its compounded annualised total shareholder return since inception in 1974 is 15 per cent in Singapore dollar terms.

According to the survey, the government should emulate Temasek's model to lend professionalism and autonomy to the disinvestment programme.

"The government can transfer its stake in the listed CPSEs to a separate corporate entity. This entity would be managed by an independent board and would be mandated to divest the government stake in these CPSEs over a period of time," the survey, which was tabled in the Parliament by Finance and Corporate Affairs Minister Nirmala Sitharaman, said.

"This will lend professionalism and autonomy to the disinvestment programme which, in turn, would improve the economic performance of the CPSEs."

It called for aggressive disinvestment to bring in higher profitability, promote efficiency, increase competitiveness and promote professionalism in management in the selected CPSEs for which the cabinet has given in-principle approval.

At present, there are about 264 CPSEs under 38 different ministries or departments, of these, 13 ministries have around 10 CPSEs each under their jurisdiction.

"It is evident... that many of the CPSEs are profitable. However, CPSEs have generally underperformed the market as is evident from the average return of only 4 per cent of BSE CPSE Index against the 38 per cent return of BSE Sensex during the period 2014-2019," it said.

"The aim of any privatization or disinvestment programme should, therefore, be the maximisation of the Government's equity stake value."

Besides, the survey said the focus of the strategic disinvestment needs to be to exit from non-strategic business and directed towards optimizing economic potential of these CPSEs.

"This would, in turn, unlock capital for use elsewhere, especially in public infrastructure like roads, power transmission lines, sewerage and irrigation systems, railways and urban infrastructure," it said.

Currently, 28 CPSE have received 'in-principle' approval from Cabinet Committee on Economic Affairs (CCEA) for strategic disinvestment.

( With inputs from IANS )