Budget 2021: Sitharaman announces strategic divestment in 2 PSU banks, one general insurance firm

Finance Minister Nirmala Sitharaman in her Budget 2021 speech on Monday announced strategic divestment in two public sector companies and financial institutions, including 2 PSU banks and one insurance company, in the next fiscal year. FM also put disinvestment receipts at ₹1.75 lakh cr for fiscal year beginning April 1, 2021.

Sitharaman said that NITI Aayog to be asked to work on next list of central public sector companies for disinvestment. Two PSBs and one general insurance company to be divested, legislations amendments to be introduced in this session.

She also added that LIC IPO will be brought in FY22. BPCL, Air India, Shipping Corp, Container Corp and other disinvestments will be completed in 2021-22, she added.

Moreover, the Finance Minister announced that asset reconstruction and management company will be set up for stressed assets of banks.

The Foreign Direct Investment insurance increased to 74% from 49%, Sitharaman added.

The government has garnered ₹19,499 crore through CPSE disinvestment and share buyback so far in 2020-21, as against the ₹2.10 lakh crore budget target set for the entire fiscal year ending March 31.

Sitharaman had in her Budget for 2020-21 set a target of raising ₹2.1 lakh crore from privatisation, sale of minority stakes in state-owned companies and share buyback by CPSEs.

While ₹1.20 lakh crore was to come from stake sale in CPSEs, ₹90,000 crore was to be mopped up from share sale in financial institutions.

As many as 4 CPSEs — Hindustan Aeronautics Ltd (HAL), Bharat Dynamics, IRCTC and SAIL— have come out with offer-for-sale (OFS) this fiscal year. This fetched ₹12,907 crore to the exchequer.

Besides, initial public offering (IPO) by IRFC and Mazagon Dock Shipbuilders together fetched ₹1,984 crore.

Moreover, selling of government stake in private companies held through SUUTI and other transactions garnered about ₹1,837 crore. So far in current fiscal year, 4 state-owned companies -- RITES, NTPC, KIOCL, NMDC-- have completed share buyback which got ₹2,769 crore to the exchequer.

A buyback, also known as a share repurchase, is when a company buys its own outstanding shares to reduce the number of shares available in the open market.