As the government is likely to miss its divestment target for the fifth consecutive year in FY24 by a wide margin, expectations for the new fiscal in the interim budget is not high as previous stake sale plans are yet to materialise
Without meeting the divestment targets, overall revenues for the government could be strained by the end of FY24
Illustration: Chaitanya Dinesh Surpur
Well, it is no more surprising, if the same thing is repeated for five years. There is no doubt that the government’s divestment plans laid out in Union Budgets is mostly ambitious, but it has hardly met its own target. For the fifth consecutive year, the government is unlikely to meet the divestment target of FY2024 by a wide margin, with hardly three full months left for the fiscal closing.
The government aimed to garner Rs 51,000 crore (Rs 510 billion) by end of March 2024 by selling stake in public sector undertakings (PSUs). However, that looks unachievable, considering from April to November 2023, the government has mopped up only Rs 8,860 crore, which is merely 17.4 percent of the budgeted estimates.
As on January 11, the total receipts from divestments for the government was Rs 10,050 crore, shows data provided by the Department of Investment and Public Asset Management (Dipam). This includes sales of the government’s stake in Coal India, Rail Vikas Nigam, SJVN, Housing and Urban Development Corporation Ltd, IRCON International and Hindustan Aeronautics through the offer-for-sale (OFS) route. There was just a single listing of shares of a PSU company called Indian Renewables Energy Development Agency in which the government sold a 10 percent stake for Rs 860 crore, through the initial public offering (IPO) route.
Garima Kapoor, economist, Elara Capital says that earlier in FY24, the economic environment was quite uncertain mainly due to the Russia-Ukraine crisis and a sharp rise in commodity prices like crude oil. She explains that while bids for the IDBI stake sale were received, the vetting from Reserve Bank of India (RBI) took a long time. Additionally, the ongoing political tension with Canada may delay the procedure as one of the bidders as per media reports was Prem Watsa-backed CSB Bank from Canada. Moreover, robust tax collections as well as surplus transfer from the RBI and other government-run companies meant that the central government will be able to achieve its FY24 fiscal deficit target, despite the underachievement on disinvestment. “As such, the urgency to conclude the process was not very compelling,” she adds.
Also read: IDBI Bank divestment: Strong optics and no hidden surprises lure potential buyers