The Indian government expects to raise Rs 51,000 crore from stake sales in various state-run companies, budget documents released on Wednesday showed.
Data from the DIPAM website shows that proceeds from disinvestment stood at Rs 31,106.64 crore, only 48% of the budgeted amount of Rs 65,000 crore. However, the mop-up estimate for the ongoing fiscal has been revised to Rs 50,000 crore.
In the current fiscal year, the budgeted disinvestment target has been missed, like in the past four years.
The government is currently working on privatising a host of CPSEs like Shipping Corporation of India, NMDC Steel Ltd, BEML, HLL Lifecare, Container Corporation of India and Vizag Steel, besides IDBI Bank. These strategic sale processes are in various stages and a majority of them are expected to be completed in the next fiscal, beginning April 1.
Privatisation plans of BEML and Shipping Corp of India have seen delays due to regulatory clearances, and the Indian government’s maiden stake sale in lender IDBI Bank is expected to be completed by September 2023.
Divestment since 2014
The pandemic-induced uncertainty, the geopolitical conflict, and the associated risks have posed challenges before the plans and prospects of the government’s disinvestment transactions over the last three years.
Nevertheless, the government has reaffirmed its commitment towards privatisation and strategic disinvestment of Public Sector Enterprises by implementing the new Public Sector Enterprise (PSE) Policy and Asset Monetisation Strategy.
The 2021-22 Budget had identified monetisation of operating public infrastructure assets as a key means for sustainable infrastructure financing.
Following that, in August 2021, the government listed projects worth Rs 6 lakh crore under the National Monetisation Pipeline (NMP) that will be looked at to unlock value in infrastructure assets across sectors ranging from power to road and railways by fiscal 2024-25.
Also in the 2021-22 Budget, the government announced the PSE policy as per which all PSUs will be privatised, barring those in four strategic sectors — Atomic energy, Space and Defence; Transport and Telecommunications; Power, Petroleum, Coal and other minerals; and Banking, Insurance and financial services.
Disinvestment receipts add to the state’s non-tax revenue, and robust inflows from this category could help the government quickly narrow its budget gap.
Ahead of the Union Budget, analysts had forecast that the Centre will moderate its divestment target for FY24 after mop-up fell short this year.
“We pencil in divestment receipts of Rs 35000 crore in 2022/23…For 2023/24, we factor in divestments of Rs 50,000 crore,” Kotak Institutional Equities had said in a note.
Nomura, too, had expected a more conservative target.
“The process of disinvestment and privatisation continues to be delayed, consequently increasing the burden on fiscal accounts,” said Morgan Stanley. It expected the government to budget for just 350 billion rupees in receipts from share sales in public enterprises this year.
The government has achieved or surpassed its disinvestment target only in eight of the 32 instances in the past, economists at the Bank of Baroda wrote in a note.
“Clarity on disinvestment is very important to give the market a clear signal,” said the economists.