Privatisation push loses steam as IDBI Bank stake sale scrapped

India’s privatisation push, once projected as a cornerstone of economic reform, has suffered another setback, with the Centre set to call off the IDBI Bank stake sale, highlighting the political and structural constraints shaping the country’s disinvestment policy, experts say.

- HARSH KUMAR

“The stake sale is likely to be scrapped because the bids came in below the reserved price set by the government. It appears that prevailing global uncertainties and continuously changing market conditions may have affected investor appetite and valuations,” a government official said.

The government and state-run Life Insurance Corporation of India (LIC) had been planning to sell a 60.7 per cent stake in IDBI Bank as part of the Centre’s broader privatisation programme aimed at reducing state ownership in the banking sector.

The government holds 45.48 per cent in the lender while LIC owns 49.24 per cent.

In the government's original strategic-sale pipeline, with companies such as Bharat Petroleum Corporation Ltd, Container Corporation of India, BEML, Shipping Corporation of India, and IDBI Bank, only Air India has been privatised so far, sold to the Tata group in 2022 for ₹18,000 crore.

Experts say the difficulty lies not merely in execution but in the inherent tensions within the government's objectives.

“Disinvestment becomes difficult primarily because the government wants to realise a good valuation for public-sector enterprises. These assets are often seen as ‘family silver’, so selling them at a low price is politically and economically difficult,” said Kavita Rao, director, National Institute of Public Finance and Policy.

According to Rao, when public-sector companies are reasonably profitable, governments often prefer partial stake sales through the market rather than outright privatisation.

“Full privatisation requires finding buyers willing to pay a high valuation, which is not always easy,” she said.

The complexity of the process itself often contributes to delays and reversals, said former Finance Secretary Ajay Narayan Jha.