New Delhi: The Union Budget 2019 today pegged the disinvestment target for the year at Rs 1,05,000 crore. Finance Minister Nirmala Sitharaman also highlighted in her speech that India’s debt to GDP ratio is among the lowest globally.
Last year, the government raised Rs 85,0000 crore from selling assets such as Coal India Ltd. and Bharat Heavy Electricals Ltd.
February’s interim budget had pencilled in Rs 90,000 crore from divestment this year. Analysts were expecting the disinvestment target this time to be pegged at Rs 1,00,000 crore, higher than the interim budget target.
The government had earlier announced in March that it exceeded its disinvestment target for the 2018-19 fiscal by Rs 5,000 crore, with the proceeds touching Rs 85,000 crore.Such strategic sale of loss-making public companies helps the government avail periodic infusion of funds, reducing the hit on government finances. In the current fiscal though, the government hasn’t been able to sell any CPSE despite having approval for 24 of them.
All 24 of these companies are loss-making ones — they include Air India, Scooters India, Bharat Pumps, Project & Development India, Hindustan Prefab, Hindustan Newsprint, Bridge and Roof Co and Hindustan Fluorocarbons.
According to an ET report, 71 out of 257 operational CPSEs were in the red in FY18 with a combined loss of Rs 31,260 crore. Of this, BSNL and MTNL accounted for about Rs 11,000 crore, and Air India Rs 5,338 crore.
The government has collected Rs 9,500 crore from the fifth tranche of CPSE ETF and Rs 14,500 crore from the REC-PFC deal. Rs 17,000 crore was raised by the government from the third offer of the CPSE exchange traded fund, besides Rs 8,325 crore from Bharat 22 ETF. PSU giants Bharat Heavy Electricals, Cochin Shipyard, Nalco, NLC India and KIOCL announced share buybacks during the financial year.
As many as 57 central public sector enterprises (CPSEs) are listed with a total market capitalisation of more than Rs 13 lakh crore, according to an official statement. Three IPOs — IRCON International, RITES and Garden Reach Shipbuilders — hit the market during 2018-19.The government had garnered over Rs 1 lakh crore from disinvestment proceeds during 2017-18, as per official data. The budgeted target for the year was Rs 72,500 crore. The huge jump in proceeds was because of ONGC’s acquisition of HPCL for Rs 36,915 crore — more than half the target for that year.
As per latest reports, the government will soon reactivate the alternate mechanism route for divestment. Under the mechanism, profit-making state-run entities will be privatised — marking a sharp shift from the earlier policy of disinvesting only loss-making CPSEs.
The government could soon ask Niti Aayog to prepare a list of non-strategic profitable companies that can be privatised. One list is already there that includes Air India.
The alternative mechanism that aims to expedite strategic sales was set up during the first term of Modi government. Under this system, select empowered for the purpose take a call on timing, price and amount of shares of a PSU to be put on sale.
It facilitates fast decision-making as every proposal need not be cleared by the CCEA. The empowered group usually features the FM, the road transport and highways minister and the minister of the department to which the PSU belongs.
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