Thread by @someshjha7

Part II of #ThePrivatisationFiles:
A week before presenting the Budget in Feb., the Modi government decided to go aggressive on its privatisation plan & introduced significant changes to the proposed policy drafted in July 2020.

But...

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The government wanted to be just in time. So, the team shepherding the new policy skipped over some of the processes laid down for inter-departmental consultations.

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Remember how we told you in part I of #ThePrivatisationFiles that objections and concerns raised by key ministries on the draft policy circulated in July 2020 kept pouring in for months?

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Now, documents show that the policy finally approved by the Cabinet (on Jan. 27) just ahead of the Budget announcement was far more ambitious and wide-ranging than the proposal which was first circulated in July 2020.

The following key sectors were removed from the 'strategic' list (where the government plans to keep at least some presence) in the final policy.

This is significant as the policy shortens the time for finalising the firms for privatisation. The govt decided that for non-strategic sectors, the disinvestment dept will move a proposal directly for the approval of the Cabinet (instead of a multi-layered process).

Its worth noting that the July 2020 draft note had laid down very broad criteria on sectors that qualify as ‘strategic’.

But in Jan, the criteria for strategic sectors was more specific.

Immediately, the list of strategic sectors whittled down.

There were other subtle changes between the first draft in July and what was approved in January also gave the government a wider berth in proceeding with privatisation decisions.

For the changes, read part II of #ThePrivatisationFiles here: bloombergquint.com/business/modis…

Now, lets talk about the process followed (or skipped).

The rulebook says that it was incumbent upon DIPAM and the Finance Ministry, which was driving the process, to consult other ministries a second time on the privatisation policy as there were many changes from the draft.

DIPAM chose not to do this.

Official records show that DIPAM made a case, in a file noting dated Jan. 23, that the final note need not be circulated for inter-ministerial consultations again.

The Finance Minister's approval was sought. And it came within hours.

Seeking exemption from another round of consultation, the department argued that the policy will only classify firms into strategic & non-strategic sectors & there will be multi-layered consultations that will happen later (being trimmed as stated above).
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A finance ministry official said that the final note did not have “substantial” changes so the need for another round of consultation was not felt. Since the Cabinet discussed the final note, ministers had an opportunity to express their concerns, this person said.

We also spoke to former bureaucrats to know their views on the process that was skipped.

You can read them here in our part II of #ThePrivatisationFiles: bloombergquint.com/business/modis…