On February 1, when Finance Minister Arun Jaitley will present the Budget 2018, many will be eagerly waiting for the disinvestment target for the financial year 2019. Ahead of this year’s Union Budget, the Narendra Modi-led NDA government at the centre has raised a record Rs 91,253 crore as against the target of Rs 72,500 crore for the year, which is a historic first. Will the government set an aggressive disinvestment target for FY19? A majority of economists, fund managers, analysts and experts surveyed by FinancialExpress.com say that FM Jaitley will set an ambitious target.
In the ten months of the financial year 2018, the central government has reduced stake in several PSUs, including HUDCO, EIL, NTPC, NALCO and OIL. Rusmik Oza, Head-midcaps at Kotak Securities says that to maintain fiscal deficit in times of less visibility on indirect taxes the government would like to rely heavily on divestment in FY19. Since this is the last full year Budget prior to the 2019 general elections, Modi government may go in for strategic disinvestment in FY 2019 and apart from stake sale in PSUs, it could also consider a second fund-raising exercise with Bharat-22 ETF. It may also consider stake sale in Specified Undertaking of the Unit Trust of India (SUUTI) stocks, an announcement could be made in the Union Budget.
Budget 2018: Ambitious disinvestment target
16 respondents in the pre-Budget survey said that in this year’s Union Budget, Finance Minister Jaitley would set an ambitious target. “While they have managed to achieve FY18 disinvestment target, most likely they would continue with the current run rate of Rs 80000 crore. This year government managed to achieve its target with stake sale of HPCL to ONGC – hence for next year even Rs 80000 crore would be difficult to achieve,” says Siddharth Khemka, Head – Retail Research, Motilal Oswal. However, 5 respondents say that in Budget 2018 the finance minister will not set a stiff target. Sahil Kapoor, Chief Market Strategist, Edelweiss Investment Research says that the government has already utilized a large number of its resources in FY18 and FY19 is likely to be a year of balancing out and gaining more on tax revenues.
Many economists and experts are of the view that FM Jaitley could set a disinvestment target of Rs 1 lakh crore in Budget 2018, this would be around 40% higher than last year’s target. Sachchidanand Shukla, Chief Economist, Mahindra Group says, “The government will set itself an aggressive disinvestment target because more resources are needed in hand, given the tight fiscal situation.” Agrees Harsh Shrivastava at Feedback Infra, “To raise revenues for its spending plans, the government needs to privatize more.”
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India Budget 2018: Big-ticket Air India disinvestment
What will help Finance Minister Jaitley in achieving this target is the big ticket disinvestment of Air India. As widely reported prior to the Union Budget, a group of ministers is in the process of finalising the contours for the proposed strategic stake sale in the national carrier and expression of interest is likely to be invited from bidders soon.
Investors in stock markets will keenly watch how equities react to Union Budget 2018. Markets are already at an all-time high and if the stocks react positively, the government can capitalise and dilute stake in many companies. Jaideep Arora, CEO, Sharekhan, says “Taking advantage of the favourable conditions in the capital markets, the government is expected to focus on higher inflows from non-tax sources of revenues including divestment and privatization of loss-making public sector units in the Union Budget 2018-19.” Agrees an economist from a premier financial institute. “For funding all the above plans. Also markets doing good, it is a good time for disinvestment,” he added.