Govt has its eye on ₹50,000 cr kitty via divestment in FY25
Higher non-tax revenues, including dividends from RBI and state-run banks, are expected to offset the revenue shortfall from disinvestments, prompting the government to revise downwards the FY24 fiscal deficit target to 5.8% of GDP.
The government has set an ambitious divestment target of ₹50,000 crore for FY25, about 67% higher than its revised target of collecting ₹30,000 crore selling its holdings in public sector enterprises in the current fiscal year ending 31 March.
In the budget for FY24, the government had originally targeted ₹51,000 crore from the sale of its stakes in various public sector companies.
As of 1 February, the government has raised only about ₹12,500 crore, and it is unlikely that the revised divestment target for FY24 will be met.
Experts said that the disinvestment target was lofty and has not been met five years running, but some said that the target could be met if the government liquidates its minor shareholdings in outperforming sectors.
“The current valuations of PSU stocks offer a unique opportunity to the government to marginally dilute their shareholding (without compromising control) in a number of blue-chip companies. A number of stocks in the power sector, across the value chain, are trading at or near life-time highs and offer an attractive liquidity option to the government. This could easily help achieve disinvestment levels upwards of $8-12 billion,” said Uday Bhansali, president, financial advisory, Deloitte India.
However, higher non-tax revenues, including dividends from the Reserve Bank of India (RBI) and state-run banks, are expected to offset the revenue shortfall from disinvestments, prompting the government to revise the FY24 fiscal deficit target downwards to 5.8% of gross domestic product (GDP), from 5.9% earlier.
In the interim budget for FY25, the government expects dividends from state-owned firms at ₹50,000 crore in FY24, up from the budget estimates of ₹43,000 crore. As of 1 February, the government has already got ₹44,060 crore as dividend from public sector enterprises.
The government expects ₹1.02 trillion dividend from RBI and state-owned banks in FY25, it said in budget 2024-25 document. It also expects ₹48,000 crore dividend from state-owned companies next fiscal year.
“The government may not need more proceeds from disinvestments in next year too as the final dividend proceeds for FY25 from public sector enterprises are also likely to be significantly higher next year as those will be accounted for in FY25,” said Ranen Banerjee, Partner and Leader Economic Advisory, PwC India.
The department of investment and public asset management managed to do one major public listing, of LIC of India in 2022, but most of the ongoing strategic divestments - where government sells its full stake and transfers ownership - are yet to make progress, and may spill over to the next fiscal year.
Eight strategic disinvestments are currently in various stages: IDBI Bank Ltd, BEML Ltd, Shipping Corp. of India Ltd, HLL Lifecare Ltd, Projects & Development India Ltd, Indian Medicines Pharmaceutical Corp. Ltd and Ferro Scrap Nigam Ltd.
The government is yet to seek expressions of interest for Container Corp. of India Ltd, and has no plans to restart the disinvestment process of Bharat Petroleum Corp. Ltd. Other likely candidates for divestment during FY25 are Rashtriya Ispat Nigam Ltd (RINL) and some subsidiaries under AI Assets Holding Ltd.
It had to scuttle strategic sales of Bharat Petroleum Corporation Limited and has been facing delays in cases of Shipping Corporation of India and Container Corporation, due to market conditions.
Some said that the government’s divestment strategy needs to be re-evaluated to ensure that future targets are met. “Perhaps, exploring alternative divestment methods including considering different avenues like strategic sales, minority stake offerings, etc., beyond just large-scale privatization will need to be looked into,” said Rajesh Sivaswamy, Senior Partner at law firm King Stubb & Kasiva.
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Business NewsEconomyGovt has its eye on ₹50,000 cr kitty via divestment in FY25
First Published:1 Feb 2024, 01:34 PM IST
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