After Air India and NINL privatisations, the government’s divestment dreams have come to a grinding halt with the government missing its divestment targets for the fifth consecutive year.
Finance Minister Sitharaman in her previous budget for current fiscal had announced that the government sought to raise around Rs 51,000 crore. The Department of Investment and Public Asset Management (DIPAM) website shows the government has managed to raise a meagre Rs 10,051.73 crore this financial year so far, with the largest chunk coming through Central Public Sector Enterprises (CPSEs) IPOs (Initial Public Offering) and OFS’ (Offer For Sale).
The government had first announced privatisation plans for companies like Bharat Petroleum Corporation Ltd (BPCL), Shipping Corporation of India (SCI) and CONCOR around 2019 but got delayed following the break out of the Covid-19 pandemic. the strategic sale of CPSEs like BEML, SCI, HLL Life Care, NMDC Steel, and IDBI Bank is likely to be completed in the current financial year. Analysts have now said that these companies may be privatised only after the General Elections.
The government’s strategy for divestment saw significant success with the successful privatization of Air India to Tata Group and NINL to TSLP in 2022. However, due to changing market conditions, the government has had to adjust its targets. To start with, the government had to scrap the planned strategic divestment of state-run retailer BPCL due to unfavorable reception during bids, even though it aimed to raise approximately Rs 50,000 crore from it. The government is encountering resistance from employee unions in its attempt to sell RINL and Vizag Steel. More recently, it cancelled the divestment of SAIL’s Salem steel plant due to a lack of bidder interest.Additionally, the government has had to adjust its priorities ahead of the upcoming General Elections scheduled for April-May. In response to external uncertainties and stock market fluctuations, the Finance Ministry, as reported by ET in October last year, was considering a ‘prudent sell-off’ approach. The government is now emphasizing selling its assets at the right price, taking investor interests into consideration, and is not pursuing divestment merely for the sake of it, according to sources cited by ET.Over the past six years, the prominent modes of disinvestment methods included exchange-traded funds (ETFs), offer-for-sale (OFS), strategic disinvestment, share buybacks, and initial public offerings (IPOs). The actual receipts from divestment have not matched the budgeted estimates since FY19. In fact, since 2010, barring FY18 and FY19, the Centre’s actual receipts from divestment have fallen short of the estimates consistently, with targets getting aggressive by the year.
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