The government has doubled its disinvestment target for the next fiscal year to Rs 2.1 trillion (about $29.36 billion) to compensate for the shortfall in tax revenue and increase spending on social and infrastructure projects.
The government also plans to sell a small portion of its holding in state-run insurance behemoth Life Insurance Corp. (LIC) of India through an initial public offering, finance minister Nirmala Sitharaman said while presenting the budget for 2020-21 in parliament.
Besides, the government plans to offload its balance stake in IDBI Bank to private, retail and institutional investors through the stock exchanges, she said.
Sitharaman said stock-market listing disciplines companies and provides them access to financial markets. “It also gives opportunity for retail investors to participate in the wealth so created,” she said.
For the financial year that begins on April 1, the government aims to raise Rs 1.2 trillion via disinvestment. It also aims to mop up Rs 90,000 crore by selling its stake in public-sector banks and financial institutions. This is part of a plan to keep the fiscal deficit at 3.5% of gross domestic product.
Earlier this week, the government proposed to sell its entire stake in flagship carrier Air India in a revised deal as compared with an earlier plan to sell a majority stake in the airline company that found no takers.
The Centre also plans to sell its 53% stake in oil refining company Bharat Petroleum Corp Ltd (BPCL). At current rates, the government's stake in BPCL is worth nearly Rs 51,000 crore, stock-exchange data shows.
In the previous budget, the government had targeted Rs 1.05 trillion through disinvestments in this fiscal year. However, the government has so far managed to raise just Rs 18,094.59 crore. As a result, the government lowered its disinvestment target to Rs 65,000 crore for the current fiscal year.
In 2018-19, the government had set a target of Rs 80,000 crore. While it managed to raise nearly Rs 85,000 crore, a majority of it came in the form of special dividends and share buybacks.
Separately, the Economic Survey released on Friday pointed out that disinvestment has not benefited investors with superior returns in the past.
From 2014 to 2019, central public-sector enterprises yielded an average return of just 4% as per the BSE CPSE index against an average 38% returns yielded by the Sensex in the same period, according to the survey. The survey also called for the government to adopt an aggressive disinvestment strategy and create an independent entity akin to Singapore state investment firm Temasek Holdings to hold and divest its stake in state-run companies.
In India, there are roughly 264 state-run firms falling under 38 different ministries or departments. Of these, 13 ministries have around 10 CPSEs each under its jurisdiction.
The Centre should exit non-strategic businesses and optimize the economic potential of state-run firms and unlock the capital for use in the development of public infrastructure like roads, power transmission lines, sewage systems, irrigation systems, railways, and urban infrastructure, the survey had stated.