The government has moderated its divestment target for financial year 2021-22, after having set a lofty target in the previous year and missed it.
The central government aims to garner Rs 1.75 lakh crore through divestments in 2021-22, according to Union Budget documents. In FY21, the government had budgeted to raise Rs 2.1 lakh crore through divestments but fell short.
Some of the big-ticket divestments planned last year, such an initial public offering of Life Insurance Corp. of India, will conclude this year, helping the government raise resources, Finance Minister Nirmala Sitharaman said in her budget speech. Other sales which will be completed this year are Bharat Petroleum Corp., Shipping Corporation of India, Clearing Corporation of India Ltd., BEML Ltd. and Pawan Hans Ltd., among others, the minister said.
The finance minister also said apart from IDBI Bank Ltd., the divestment of two other state-run lenders and one general insurer has been proposed in FY22. She didn’t specify the name of the companies.
In addition, the government has approved a new public sector enterprises policy, which is intended to drive privatisation. As part of that policy, the government is identifying strategic sectors, where it will retain a maximum of four public sector enterprises. In other sectors, it will steadily privatise government units.
To fast-track divestment, the finance minister has asked NITI Aayog to identify CPSEs that would be taken up for strategic divestment. The government will also work out an incentive package to nudge states to divest their public firms.
Asset sales by the Indian government are being seen as key to bridging the government’s budget gap, which is set to widen to 9.5% of the GDP in the ongoing fiscal.
Meaningful fiscal support to the economy in FY22 hinges on revenue generation from the government’s disinvestment programme, said a note by QuantEco Research ahead of the budget. Asset sales continue to remain a low hanging revenue-generating stream, given the large number of potential disinvestment targets identified, it said.