FM Sitharaman likely to raise stake sales target to ₹1.5 trillion

Finance Minister Nirmala Sitharaman. (Photo: Pradeep Gaur/Mint)

NEW DELHI : Finance minister Nirmala Sitharaman is likely to set an even more ambitious disinvestment target of 1.5 trillion for the year starting 1 April, mostly because many of the strategic sales planned for the current year, including that of Air India, have been delayed.

The strategic disinvestments that are now expected to be completed in the next fiscal include Air India, Bharat Petroleum Corp. Ltd (BPCL), Container Corporation of India Ltd (Concor) and Shipping Corporation of India Ltd (SCI).

“We expect around 1 trillion from the privatization of BPCL, Air India, Concor, SCI and the rest from buybacks and follow-on public offers in some CPSEs (central public sector enterprises),” a finance ministry official said on condition of anonymity. “While the process of strategic disinvestment of the four CPSEs will begin in the current fiscal year, the proceeds will accrue only in the next fiscal year.”

The stiffer target for 2020-21 comes after government officials acknowledged, as Mint reported on 26 December, that the disinvestment target of 1.05 trillion for 2019-20 will fall short by around 50,000 crore due to delays. As on 9 January, the government has garnered 18,095 crore through stake sales in 2019-20. To be sure, the government has been able to meet its disinvestment target only twice in the last eight years.

A tall order
A tall order

While the government plans to privatize Air India by selling its 100% ownership in the airline, it will divest its entire 53.29% stake in BPCL and 30.8% stake in Concor out of its current 54.8% stake and 63.75% stake in SCI. The cabinet has also decided to consolidate CPSEs in the power sector by approving the sale of its entire stake in Tehri Hydro Development Corp. (74.23% stake) and North Eastern Electric Power Corp. Ltd (100% stake) to NTPC Ltd.

The Cabinet Committee on Economic Affairs on 20 November approved a proposal to reduce the government’s stake in select CPSEs to under 51% on a case-to-case basis. However, due to limited headroom in many CPSEs and huge overseas borrowings by CPSEs such as NTPC and Power Finance Corp. Ltd, the government is finding it difficult to bring down its stake in listed CPSEs, Mint reported on 30 December.

If the government completes the strategic stake sale in BPCL, Concor and SCI, that would lay the foundation for a much more ambitious programme of disinvestment of CPSEs, sending a positive and clear message to market participants, former finance secretary Subhash Chandra Garg wrote on his blog. “If this larger and more ambitious programme of strategic disinvestment can be announced, company by company, in the Budget 2020-21, it would send very clear and positive message and team DIPAM (department of investment and public asset management) would also have time to plan and execute the transactions during the whole of 2020-21,” he wrote.

At the end of 31 March 2018, there were 339 central public sector enterprises with a total paid-up capital of 2.5 trillion and reserves and surpluses of 9.42 trillion.