India's privatisation drive falters amid weak investor interest in state-run firms

NEW DELHI: India is reportedly weighing the possibility of shelving three planned privatisation sales as investor appetite for state-run companies continues to wane, dealing a fresh blow to the government's flagship divestment programme.

Two government sources told Reuters that the privatisation plan, which has already been delayed for years, is now facing renewed setbacks. These include dwindling interest in entities such as the Shipping Corporation of India and HLL Lifecare, in addition to the collapse of the IDBI Bank stake sale last week after bids failed to meet the government's minimum asking price.

Modi's ambitious divestment agenda

Indian Prime Minister Narendra Modi had launched an ambitious privatisation agenda aimed at having the state withdraw from most sectors while retaining a presence only in sensitive areas such as telecom and banking. However, the programme has yielded limited results so far.

The government has managed to complete only a handful of transactions under this initiative. These include the sale of Air India to Tata Sons, the divestment of indirect holdings in steel-maker Neelachal Ispat Nigam Ltd to Tata Steel, and the sale of Ferro Scrap Nigam Ltd.

IDBI Bank sale setback

The failure of the IDBI Bank stake sale last week has been among the most significant setbacks for the privatisation drive. Bids submitted by prospective buyers fell short of the minimum price set by the government, effectively derailing the transaction. The IDBI Bank sale had been a closely watched test of investor confidence in India's divestment plans.

The weak investor interest in state-owned firms such as the Shipping Corporation of India and HLL Lifecare has further compounded concerns about the viability of the broader privatisation programme. The government now appears to be reassessing its approach in light of these developments.

No official response

India's finance, shipping and health ministries, as well as the companies involved, did not respond to queries from Reuters regarding the reported shelving of the privatisation plans.

The developments mark a significant departure from the ambitious targets set by the Modi government, which had positioned privatisation as a key pillar of its economic reform agenda. The inability to attract sufficient investor interest in major state-run enterprises raises questions about the future trajectory of India's divestment programme, which has repeatedly fallen short of its annual targets in recent years.