The government will miss its divestment target for the fiscal by a wide margin. Including the one-time residual stake sales in Balco and HZL, but excluding SUUTI shares in Axis Bank, the disinvestment proceeds are now seen at around R37,000 crore against the Rs 54,000-crore target. Despite this, finance minister P Chidambaram is likely to set a disinvestment target of around R38,000 crore for 2014-15 in the interim Budget on Monday, sources say.
Given the government?s current norms for disinvestment, a look at the PSU stakes on the block ? apart from stakes in L&T and ITC held through SUUTI ? reveals that next year’s target could also prove to be optimistic.
This year, the shortfall in disinvestment revenue is being compensated through higher dividend incomes ? especially from Coal India, which has shelled out close to R20,000 crore, double the amount last year ? and the extra spectrum revenue likely to be booked this year. So, the overall non-tax revenue could come close to the budget target.
“We expect the government to end FY14 with dividend/profit collection of 0.85% of GDP, exceeding its target of 0.65%,” Standard Chartered said in a report on Thursday. Dividends from PSUs (other than railways and department undertakings) alone are targeted at R29,870 crore for this year. The inflows could be higher by R10,000-15,000 crore.
Government sources told FE that the disinvestment department’s own estimate for PSU stake sale proceeds for the next fiscal is R20,000 crore.
As per current norms, the government has to maintain a minimum 51% in listed companies. This means its list of options for disinvestment has been becoming shorter, with its stake falling to 60% and below in 10 of the 44 PSUs listed on the department website. The government is not in favour of divesting companies in which its stake is already 60% or below. For 27 of the remaining 34 companies, the government has executed a stake sale in the last 23 months, so the market appetite for these companies, sources say, is doubtful.
This leaves the government with just seven companies: Power Finance (government holding 73.71%), Container Corp (63.09%), Mangalore Refinery (88.58%), Bharat Electronics (75.86%), Shipping Corp (63.75%), Chennai Petroleum (67.29%) and Dredging Corp (78.56%).
A 10% stake sale in each of these companies would fetch the government just about R5,000 crore at current market prices (see table). If HAL?s stalled IPO goes through and Coal India’s 10% stake sale, which was thwarted by unions, also materialises next year, the total proceeds could add up to around R25,000 crore, still short of the likely target of R38,000 crore.
Clearly, to get higher funds from disinvestment, the government needs to radically change the current policy.
Since the general elections are scheduled to be held by May 2014, Chidambaram would be presenting an interim budget and vote-on-account, instead of the regular full-fledged Budget, ahead of the scheduled date of February 28. The regular Budget is likely to be presented by the new government sometime in July. In the 23 financial years the government has set yearly divestment targets, it has met its target just four times .
?We hope the target is revised when the main budget is being presented,? the source added. The official said the government has been missing its disinvestment target year after year as the number of PSUs that are listed on stock exchanges have not increased drastically over the years.
The senior official said listing a company is also a daunting task as it was in HAL?s case, where disinvestment was suppose to take place in FY14, but will be pushed to FY15.