Union Budget 2016-17: Govt lowers disinvestment target2 min read . Updated: 29 Feb 2016, 03:32 PM IST
Arun Jaitley says the govt aims to raise Rs56,000 crore, which is 19% lower than the Rs69,500 crore the government had targeted in the last budget
Mumbai: The Union government aims to raise ₹ 56,500 crore by selling stakes in state-owned enterprises in 2016-17, out of which ₹ 36,000 crore will come from minority stake sales and ₹ 20,500 crore from strategic stake sales.
This is 19% lower than the ₹ 69,500 crore the government had targeted in the last budget. The target, though, was later scaled down.
The head of a domestic investment bank termed this year’s disinvestment target “realistic". He is not authorized to speak to reporters as his firm has been involved in the government’s disinvestment programme.
Deven Choksey, managing director, KR Choksey Securities Pvt. Ltd, said the basic intent of the government through disinvestment this year is to monetize land assets of public sector units and is a positive move.
“The targets are the government’s intent but the numbers look realistic this year," Choksey said.
While setting the target for the new fiscal, the government also said that a new policy for management of government investment in public sector enterprises, including disinvestment and strategic sale, has been approved.
“We have to leverage the assets of CPSEs (central public sector enterprises) for generation of resources for investment in new projects. We will encourage CPSEs to divest individual assets like land, manufacturing units, etc., to release their asset value for making investments in new projects," said finance minister Arun Jaitley.
The government is likely to miss its FY16 disinvestment target, the sixth year running and the 16th time in the 25-year history of disinvestment.
For FY16, the government had set a record target of raising ₹ 69,500 crore through disinvestment, comprising ₹ 41,000 crore by way of minority stake sale and an additional ₹ 28,500 crore from strategic sales. The ministry later trimmed its target by roughly 57% to ₹ 30,000 core, citing volatile market conditions. However, the amount garnered was even lower.
In 2015-16, the government was able to raise about ₹ 18,400 crore by selling stakes in Rural Electrification Corp. Ltd ( ₹ 1,608 crore), Power Finance Corp. Ltd ( ₹ 1,671 crore), Dredging Corp. of India Ltd ( ₹ 53.33 crore), Indian Oil Corp. Ltd ( ₹ 9,369 crore), Engineers India Ltd ( ₹ 643 crore), and NTPC Ltd (estimated ₹ 5,050 crore), data from the department of disinvestment’s (DoD) website shows.
Fears of a hard-landing of China’s economy, devaluation of the yuan and an increase in interest rates by the US Federal Reserve have muddied market sentiment and dampened the prospects of share sales by public and private companies this fiscal. Since the start of this fiscal year, the benchmark BSE Sensex has fallen a little more than 17%.
Disinvestment is a process where a company or government organization will divest an asset or subsidiary as a strategic move for the company, planning to put the proceeds from the divestiture to better use.