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PMO examines concerns over divestment hit on reservation
Under the existing laws, the reservation policy will not be applicable to those PSEs that are sold to a private entity through strategic disinvestment, the officials said. Bharat Petroleum Corporation Ltd (BPCL) would fall in this category, they added.
The Prime Minister’s Office (PMO) has asked the department of investment and public asset management (DIPAM) to examine the issue of job reservations for Scheduled Castes (SCs), Scheduled Tribes (STs) and Other Backward Classes (OBCs) in state-run companies following disinvestment, two officials with direct knowledge of the matter said.
Concerns have been raised by various stakeholders about a sharp fall in job opportunities for SCs, STs and OBCs after the disinvestment of government’s equity stakes in public sector enterprises (PSEs), either because of a change in management control or the dilution of the government’s shareholdings below 51%, the two officials said, requesting anonymity.
“A PMO reference has been received by DIPAM on the issue of SC/ST reservation in the PSUs listed for disinvestment. It is under examination,” said the first official.
Under the existing laws, the reservation policy will not be applicable to those PSEs that are sold to a private entity through strategic disinvestment, the officials said. Bharat Petroleum Corporation Ltd (BPCL) would fall in this category, they added.
Fifteen per cent of jobs are earmarked for SCs, 7.5% for STs and 27% for OBCs in government concerns, including state-run enterprises.
The legal position is, however, not yet clear in the cases where the government would reduce its equity stake below 51% while retaining management control, the officials said.
A second official mentioned above said Petronet LNG Ltd (PLL) was one example of a firm in which the government holds a 50% equity stake through four PSEs with the petroleum secretary as its chairman, but the firm does not follow the job reservation policy. PLL, a profit-making energy firm, is run by four state-run oil firms—Oil and Natural Gas Corp. Ltd (ONGC), Indian Oil Corp. Ltd (IOC), Bharat Petroleum Corp. Ltd (BPCL) and GAIL (India) Ltd with a 12.5% equity stake each. The remainder is held by financial institutions and retail investors.
PMO, DIPAM, PLL, BPCL, the finance ministry, and the ministry of petroleum and natural gas (MoPNG) did not respond to email queries.
Commenting on the non-applicability of the government’s reservation policy in firms such as PLL where the government has a 50% or lower equity stake, a parliamentary panel on March 16, 2018 said the government “must introduce Reservation Policy for SCs and STs in all Joint Ventures like Petronet LNG Ltd in order to ensure adequate representation of SCs and STs”.
The MoPNG, however, told the panel that a company with 50% government and 50% private equity stake, such as PLL, is not a government entity so the reservation policy for SCs and STs does not apply to it
“Imposing the government’s reservation policy on prospective private buyers of companies slated for strategic disinvestments (Air India and BPCL) would chase them away. Legal validity needs to be examined in other cases, where government would bring down its equity stake below 50% without losing management control,” the second official said.
According to BPCL’s latest annual report, out of a total 11,894 employees in the company on January 1, 2019, 16.15% (1,921) were SCs, 6.24% (743) STs and 17.16% (2,042) OBCs.
A company executive said requesting anonymity that the numbers, however, vary due to retirements and fresh recruitment. “Representation of SCs, STs and OBCs is maintained in fresh recruitments and promotions as was the case when we directly recruited 507 persons last year (2018) and promoted 196 employees,” the executive said.
Two legal experts with direct knowledge of the matter said on condition of anonymity that the reservation policy will not be applicable in both cases—strategic disinvestment and dilution of the government’s stake below 51%. “The moment you dilute your equity stake below 51%, you lose certain privileges. Hence, continuation of reservation policy seems unlikely post disinvestment. But the government can always put in a transition clause that can give some protection to the existing SC/ST employees for couple of years. They will, however, be treated at par with other employees in all matters after the transition period,” one expert said.
The government has the ambitious target of raising ₹1.05 lakh crore in 2019-20 through disinvestment. So far it has divested stakes worth ₹17,364.26 crore. It has to achieve the balance in the remaining three months of the current fiscal year.
Minister of state for finance Anurag Singh Thakur told the Rajya Sabha on December 10 that the government has given “in-principle” approval for strategic disinvestment in 33 PSEs, including subsidiaries and joint ventures, with the transfer of management control.
The companies identified for strategic disinvestment include BPCL (except its equity shareholding of 61.65% in Numaligarh Refinery Ltd), Shipping Corporation of India Ltd (SCI), and Container Corporation of India Ltd (CONCOR). The government also plans to privatise its flagship carrier, Air India, by selling its entire 100% stake, through strategic disinvestment.
Making a presentation on the economy on December 13, 2019, chief economic adviser K Subramanian said the government plans “widening the bandwidth of disinvestment for minority stake sale” by bringing down the government’s equity below 51% in select central PSEs “on case-to-case basis” to increase “wider public ownership” of selected firms.
