The finance ministry has cut its ambitious disinvestment revenue target by 57% to Rs 30,000 crore for the current fiscal as ‘strategic’ sales have failed to take off and minority stake sales in PSUs also staggered after some initial promise, due to volatile market conditions, sources said.
Despite missing targets in the past five years, the Centre had set a stiff disinvestment revenue target of Rs 69,500 crore (Rs 41,000 crore through PSU stake sales and Rs 28,500 crore via strategic stake sales including privatisation of some PSUs) for FY16.
Even though Rs 12,700 crore was collected in the first half of FY16 by selling stakes in four PSUs, the highest disinvestment in the first half in the past seven years, the government is finding it tough to come out with any new sales. This was evident from the fact that there were no stake sales in September-December as the market was volatile and investors had very low appetite for PSU stocks, one official said.
With global investment bankers going on leave after stock-taking of their investment activities in December, officials expect them to hit the market only towards the end of January after fresh fund allocations are made by investors for 2016. So meeting the revised disinvestment target of Rs 30,000 crore depends on how many stake sales the government is able to carry out in February-March.
Given the kind of adverse feedback the department of disinvestment got on the proposed 10% stake sale in Coal India (CIL), which could have fetched about Rs 20,000 crore, it may think twice before coming out with the issue in the current fiscal year. The issues pertaining to CIL vary from greenhouse gas emission concerns to efficiency in operations, sources said.
Of the Rs 28,500 crore to be raised from strategic sales including the sale of residual government stake in some private companies including Hindustan Zinc and Balco, privatisation of some loss-making, as well as profit-making PSUs, and the sale of a portion of SUUTI (Specified Undertaking of Unit Trust of India) stakes in companies, namely Axis Bank, ITC and Larsen and Toubro, there is hardly any progress.
Further, lack of policy on privatisation of PSUs has also hurt. After the abolition of the Board for Reconstruction of Public Sector Enterprises, which was acting as the third Disinvestment Commission since its inception in 2004, in October, there has been no agency to take this role forward. Though officials said there was a cabinet note for setting up of a disinvestment commission to take decisions on strategic sales, a decision is yet to be taken.
Unless some profitable companies are divested, officials are not very optimistic about how much value the sale of sick units would generate. In the last five years, they say, privatisation of 36 companies fetched about Rs 5,000 crore.