DISINVESTMENT – GONE FOR A TOSS!

The Govt’s ambitious target – to raise Rs.1.75 lakh crore in FY22.

Reality – there are just three months for FY22 to end and the Govt has raised only Rs.9240 crore from minority stake sale in some 7 units. That’s a 95% shortage.

And there was Air India being sold to Tata’s for Rs.18,000 crore but of this, only Rs.2700 crore will go into the Govt kitty; the balance Rs.15,300 crore will go towards clearing the airlines huge debt.

The FM had made a grandiose announcement that of this Rs.1.75 lakh crore, Rs.1 lakh crore was to come from stake sale in PSU banks and financial institutions and Rs.75,000 crore from CPSE disinvestment.

The Govt was to also raise Rs.88,000 crore from asset monetization but there too no progress was made.

So, what all is pending?

• Divestment in – LIC, BPCL, Pawan Hans, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Neelachal Ispat Nigam.
• Apart from IDBI Bank, privatization of two PSU banks and one general insurance company – requires legislative amendments.
• Atomic energy, Space and Defence; Transport and Telecommunications; Power, Petroleum, Coal and other minerals; and Banking, Insurance and financial services were to have bare minimum presence of Govt.
• Monetisation of assets – mainly land
• Right to operate trains on 150 routes by Indian Railways

What we also discerned from past records of disinvestment is that be it the UPA or the BJP, missing targets is almost a habit. Since 2010, barring only two years, FY18 and FY19, disinvestment targets have never been met.

And even in the years that the targets were met, it was not straight forward. In FY18, 37% of the disinvestment receipts or Rs.36,915 crore were raised from the strategic disinvestment of Hindustan Petroleum Corporation Limited (HPCL) and this was bought by ONGC. In FY19, Govt raised Rs.14,500 crore from sale of REC to Power Finance Corp and Rs.30,580 crore came from exchange-traded funds.

Interestingly, in a total of 6 fiscal (including FY18 and FY19), all 51% stake sold by Govt under “disinvestment” in CPSEs, along with transfer of management control, have involved another CPSE picking up the government’s stake.

Several strategic disinvestment transactions have been in the pipeline for a long time.  For instance, sale of BPCL, approved in November 2019, is yet to be concluded.

Well, when the Budget announcements come on disinvestment, there is so much excitement and speculative price rise on expectations. But at the end of the fiscal, well, some traders have made money while some have lost and the underlining commonality – Govt does not make much money and we tax payers get burdened, like always.