Amid report that the strategic sale of BPCL and ConCor may not be completed this fiscal, doubts have emerged on government meeting the budgeted fiscal deficit target. The government has not yet invited expressions of interest (EoI) for the two government companies, Financial Express reported, adding that it generally takes nearly four months from the stage of EoI to conclude divestment deals. A departure from the divestment target could lead to a big fiscal slip, analysts said. “Severe shortfall in overall tax revenues (both direct and indirect taxes) will be compounded by large shortfall in divestment proceeds. Deferral of spectrum-related payments by two years to provide relief to beleaguered telecom companies is already weighing heavily on fiscal finances. Fiscal deficit may miss the target by a wide margin raising concerns for bond yields which may spike further,” Ajay Bodke, CEO, PMS Prabhudas Lilladher said. A delay in the privatisation of BPCL may also trigger a correction in stock markets, said Ajay Bodke said.
Finance Minister Nirmala Sitharaman reduced the fiscal deficit target to 3.3 per cent from an earlier 3.4 per cent for FY20 in the budget. The fiscal deficit hit 102.4 per cent of the budget estimate at Rs 7.2 lakh crore at the end of October.
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The slow pace of divestment may be taken as positive as the government may want to sell these PSUs at the right price and doesn’t want to rush up things, Mohammad Haleem Khan, former Divestment Secretary told ET Now. On the negative, if the government still hasn’t found a better alternative to fund revenue collection, it may have to compress expenditure and find out areas that need to be compressed, he added.
The government so far has collected just 16.5 per cent of the annual target of Rs 1.05 crore in FY20 through disinvestment. It expects to raise Rs 25,000 crore from PSU-to-PSU deals involving THDC, NEEPCO and BPCL’s stake in NRL. Similarly, Rs 60,000 crore would be raised through divestment of government’s 53.3 per cent stake in BPCL. The approximate value of the government’s 30.8 per cent stake in ConCor is Rs 11,000 crore. The cabinet in November approved strategic sale of select PSUs.
Source: Financial Express