Prime Minister Narendra Modi is pouring billions into ailing state-run firms after slowing ambitious divestment plans that were intended to reduce the role of the state in business, according to government sources and a document reviewed by Reuters.

       Less than a month into 2025, New Delhi has plans to invest about $1.5 billion in financial rescue packages for two state-owned firms after failing to sell them to private companies.

       It has also decided to put in "abeyance" privatisation of at least nine state-owned units after opposition from relevant ministries, according to a document that detailed recommendations of a government panel set up to identify privatisation candidates. The document, reviewed by Reuters, did not cite reasons for the decision.

       The nine companies include Madras Fertilizers, Fertilizer Corp of India, MMTC and NBCC (India), the document showed.

       Housing and Urban Development Corp, that was also identified for privatisation, has now been 'exempted' implying it will not be sold, according to the document.

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       Among the state-owned companies being revived with government funding is helicopter operator Pawan Hans.

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       The government is planning to infuse around $230 million-$350 million in Pawan Hans to modernise its aging fleet of helicopters after four failed attempts to sell the company, two government sources said.

       The amount of infusion is still being finalised as the options being considered for fleet modernisation include both outright acquisition and leasing, one of the sources said.

       The sources declined to be identified because of the sensitivity of the issue.

       India's finance and civil aviation ministries did not immediately reply to e-mails seeking comment on the privatisation plans or on the Pawan Hans investment.

       The fund infusion in Pawan Hans and plans to halt the privatisation of nine firms have not been previously reported.

       In 2021, Modi's government announced a major programme to privatise most of India's state-run companies. The plan was so drastic that even in the four sectors that India sees as sensitive, such as telecoms and banking, it wanted to keep only a minimum presence, while exiting from all other sectors.

       But now it is planning rescue and revival plans for companies even outside the sensitive sectors.

       Last week, the government announced a $1.3 billion plan to revive debt-laden steel producer Rashtriya Ispat Nigam Ltd (RINL).

       The government has also allocated 80 billion rupees in 2024/25 for bond repayments of state-run telco MTNL that has seen a series of defaults lately, according to budget documents for the current year.

       Privarisation slowdown

       Four years since the privatisation policy was announced, the Modi government has had only three successes, out of which Air India's sale to the Tata Group was the largest. The other two were indirect holdings in steel-maker Neelachal Ispat Nigam Ltd to Tata Steel and Ferro Scrap Nigam to Konoike Transport Co.

       Other large sales have either been deferred or delayed.

       The U-turn in policy was partly driven by the expectation that some large state-owned firms could be overhauled and made more profitable, helping the government earn dividend income, Reuters has reported previously.

       Political pressures on Modi have increased after he came back to power in mid-2024 only with the help of regional allies, making it more difficult to overcome opposition to privatisation by employee unions fearing job losses.

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       The sale of state refiner Bharat Petroleum Corp was rolled back in 2022 after failing to get suitors. The ongoing privatisation of Shipping Corp of India and BEML has been stuck for years due to complications over transfer of land holdings. The government has also been dragging its feet on the sale of a majority stake in IDBI Bank.

       In previous years, privatisation formed an important part of the government's plan to reduce its budget gap. But with the federal fiscal deficit seen falling to a more comfortable 4.9% of GDP in the 2024-25 year, the fiscal push for divestment has waned.

       New Delhi is expected to miss its internal stake sale target of 180 billion to 200 billion rupees in 2024-25 (April-March) for the sixth straight year. As of January, government has mopped up 86.25 billion rupees via stake sales in 2024/25.

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