Unlockdown 3.0: Where the mind is without fear…

Last month, this column recommended that the government take divestment seriously if we are to resurrect our economic balance.

I am happy to report that the buzz since then around divestment has not stopped.

India’s disinvestment target for 2020-21 is Rs.2.1 trillion against last year’s achievement of `34.85 billion, against the 2019-20 target of Rs.1.05 trillion. Divestment crossed `1 trillion only in 2017-18 in the past 10 years – Rs.37 billion from this was received by selling shares internally among PSUs; ONGC bought the government’s 51 per cent stake for cash.

The second highest divestment was in 2018-19 of Rs.80 billion. Government shareholding in three blue chips that are part of the CPSE ETF – namely NTPC, BEL and PowerGrid – has reached the 51 per cent threshold, thus making further stake dilution impossible.

It may have to replace these stocks with other blue chips where government shareholding is comfortably above the 51 per cent threshold. So, while FY2018 and FY2019 did send out a good signal for divestment, FY2020 has slipped. Rather than try to get best prices for shares when they reach their peaks, the government must go about its divestment plan as per target.

India’s other means of raising economic spirits could be to engage high-level FDI. Here, the country has managed to attract $20 billion during April-June 2020 during its lockdown. Google’s parent Alphabet’s CEO Sundar Pichai announced a $10 billion investment in 'Digital India' in the next five to seven years. Another major announcement during this period was by US-based Facebook, which said it would put in $5.7 billion in Reliance Jio platforms. Saudi Arabia’s Public Investment Fund has also announced plans to put in $1.6 billion in Reliance’s Jio. Another substantial investment of $1 billion was announced in recent days by Taiwanese electronics company Foxconn.

Besides these, chipmaker Qualcomm’s investor arm Qualcomm Ventures, consumer electronics major Thomson, Japan’s Hitachi, South Korea’s Kia Motors and Samsung, auto parts company Hyundai Mobis, SGS (which partnered Amazon to open its first accreditation testing lab in India), Japanese electronics company Tsuzuki (which has opened a brand-new plant at Reliance's Model Economic Township in Jhajjar in Haryana, are all in the fray in the final stages of negotiations to benefit from the Ministry of Electronics and Information Technology’s (MeitY) Rs.410 billion production-linked incentive (PLI) scheme to make mobile phones and certain other specified electronic components. This scheme would give incentives of 4-6 per cent to companies that manufacture mobile phones and other electronic components. The PLI scheme will be active for five years with FY2019-20 considered as the base year for calculation of incentives. This means all investments and incremental sales registered after FY2020 will be considered while computing the incentive to be given to each company.

This is likely to set the stage for India to become a major production hub for exporting mobile phones. Both Foxconn and Wistron, the global contract manufacturers for Apple, have applied for the scheme. Among local players, Lava, Dixon Technologies and Karbonn have applied so far. Samsung and Flextronics are also in the fray.