The strategic sale of Shipping Corporation of India (SCI) is set to be delayed until FY26, as transferring the lease of key non-core assets, including the Shipping House and Maritime Training Institute in Mumbai, is facing hurdles.
The strategic sale of SCI, India’s largest shipping company with a fleet of 70 vessels, is part of the government’s broader disinvestment strategy.
Despite recent progress, such as the approval of a stamp duty waiver by the Maharashtra government, bureaucratic delays in the state in finalising the lease transfer to the demerged Shipping Corporation of India Land and Assets Limited (SCILAL) have stalled the disinvestment process, impacting its privatisation, a senior government official said.
The transfer of non-core assets to SCILAL, a key step in the disinvestment process, has turned out to be more time-consuming and complex than initially thought. The government will now need to reassess the timeline, the official said.
“The Finance Ministry is re-engaging with line ministries to sort out several issues,” noted the official. “However, the role of other administrative ministries is critical.”
“Even a simple thing like trying to change the lease from Maharashtra has taken almost a year. The Mumbai collector has submitted the proposal to the state’s revenue department, but the process got bogged down on extensive bureaucratic consultations. If they are not pushing forward, the process would remain delayed. While no one is actively blocking the process, necessary legwork remains unfinished, leading to persistent delays,” the official further stated.
These non-core assets, including the landmark Shipping House and the Maritime Training Institute in Mumbai, are leased from the Maharashtra government, which were transferred to SCILAL to smoothen the sale of SCI’s shipping business.
The SCI assets in question are leased from the Maharashtra government and the lease needs to be transferred from SCI to SCILAL, but this change has required lengthy consultations across various state departments. This bureaucratic lag is holding up the strategic sale of SCI, which was initially greenlit by the Union Cabinet in 2020. The demerger itself, which carved out SCI’s non-core assets into SCILAL, was approved by the Ministry of Corporate Affairs only in February 2023.
Stamp duty waiver clears a key hurdle
Despite the setbacks, some progress has been made. In a move that removed a significant financial barrier, the Maharashtra cabinet approved a stamp duty waiver, saving an estimated Rs 300 crore. This was seen as a crucial step in advancing the sale, but delays in finalising lease transfers have caused further disruptions, extending the sale timeline.
Impact of delays
The sale, which involves the government selling its 63.75 percent stake, was initially expected to fetch Rs 3,000 crore for the exchequer. However, prolonged delays have cast uncertainties over its completion.
“There are multiple players involved, and while large buying interest isn’t currently visible, we are moving slowly but steadily,” the official said, explaining that the process is being overseen by the Department of Investment and Public Asset Management (DIPAM), in collaboration with the Ministry of Shipping. The process, however, continues to face legal and administrative hurdles.
Although the approval of the stamp duty waiver was expected to expedite matters, the unresolved lease transfer issues remain a bottleneck. These complications may push the completion of the sale into FY26, posing a challenge to the government’s ambitious disinvestment targets for the current fiscal year.
Modi and privatisation
The government of India did not set a specific disinvestment target for fiscal year 2024-2025 (FY25). Instead, the government estimated that it would receive Rs 50,000 crore in “miscellaneous capital receipts” for the year. Over the years, the strategy of the government has changed to building value in PSUs. Moreover, there has been a pushback on divestment from line ministries and companies. “The government is not very aggressive on divestment now. The PSUs are unlocking value and doing capacity-building. There is a marked difference in the functioning of the PSUs now. Government dividends have also increased,” he said.
