The government approved sale of Central Electronics Ltd to Nandal Finance and Leasing for Rs 210 crore, marking the second strategic disinvestment of the current fiscal. 

Central Electronics Ltd

• CEL, under the ministry of science and technology, is a pioneer in the field of Solar Photovoltaic (SPV) technology and has developed the technology with its own R&D efforts. 

• It was established in 1974 with an objective to commercially exploit indigenous technologies developed by national laboratories and R&D institutions in the country.

• It has developed a number of products through its own R&D efforts.

• CEL has also developed axle counter systems that are being used in railway signalling systems for safe running of trains.   

• This is the second time that the government had initiated the process of strategic sale of CEL after the Cabinet on October 27, 2016, approved its disinvestment. 

• In the first iteration, no financial bids were received. The sale process restarted in February 2020. 

• Based on the valuations by the transaction adviser and the asset valuer, the government had arrived at a reserve price of Rs 194 crore for CEL. 

• The government had issued a request for Expressions of Interest (EoI) on February 3, 2020, following which three EoIs were received. However, only two companies — Nandal Finance and Leasing Pvt Ltd and JPM Industries Ltd — put in financial bids by October 12, 2021.  

• While Ghaziabad-based Nandal Finance and Leasing bid for Rs 210 crore, JPM Industries quoted Rs 190 crore.  

• The Cabinet Committee on Economic Affairs (CCEA) empowered Alternative Mechanism (AM) approved the highest price bid of Nandal Finance and Leasing Pvt Ltd for sale of 100 per cent equity shareholding of government in Central Electronics Ltd (CEL).

• The Alternative Mechanism (AM) on strategic disinvestment of CEL comprised Road Transport Minister Nitin Gadkari, Finance Minister Nirmala Sitharaman and Minister of State for Science and Technology Jitendra Singh. 

• The next step will be to issue the Letter of Intent (LoI) and then sign the Share Purchase Agreement. 

• It is expected that the transaction will be completed during the current FY 2021-22 (ending March 2022). 

Disinvestment

Owing to several shortcomings, the functioning of the public sector has often been questioned. It has been argued that the public sector works well only when it is protected by state measures. Some also argue that the public sector has entered in too many areas and, therefore, must withdraw itself by giving entry to private players. Thus, privatisation of some PSUs was advocated and disinvestment was the process through which this privatisation could take place.

Various reasons given for the disinvestment are:

• It will release a large amount of public resources locked up in non-strategic PSUs. Then these resources can be redeployed in areas that are much higher on social priority such as health, education, etc. 

• Reduction in the public debt.

• Transferring the commercial risk to private sector where it is willing to share it. 

• Releasing manpower and other intangible resources for redeployment in high priority social sectors. Enabling public having ownership or say in management of some PSUs.

National Investment Fund

The proceeds of disinvestment go into National Investment Fund (NIF), which was setup in 2005. The purpose of the fund was to receive disinvestment proceeds of central public sector enterprises and to invest the same to generate earnings without depleting the corpus. The earnings of the Fund were to be used for selected Central Social Welfare Schemes. This fund was kept outside the Consolidated Fund of India.

In 2013, NIF was restructured and it was decided that the entire disinvestment proceeds will be credited to the existing ‘Public Account’ under the head NIF and they would remain there until withdrawn/invested for the approved purpose. 

The allocations out of the NIF will be decided in the annual government budget.

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