The finance ministry has started to take a realistic view of the money it could raise from disinvestment in FY14. According to ministry officials, the government should be able to gather R10,000-13,000 crore, way below the disinvestment target of R40,000 crore set for this financial year.
The tapered expectation is thanks to the cancellation of the stake sale plan in Coal India, which could have given the government up to R20,000 crore. Now, the government is expecting about R4,500 crore from the sale of a 10% stake in Indian Oil Corporation (IOC) to Oil India and ONGC, while another R2,100 crore is expected from a similar sale in Bhel. The government is also expecting about R3,000 crore from exchange traded funds and about R500 crore from the follow-on public offering in Engineers India. So far, only R3,000 crore has been raised from minor stake sales in companies like PowerGrid, Hindustan Copper, National Fertilisers and MMTC.
Since it is crucial for the government to meet its fiscal deficit target of 4.8% to avoid a skeptical view from international rating agencies, attempts are being made to fill up the shortfall by forcing cash-rich PSUs to give a higher dividend. CIL was forced to pay a record dividend of R29 a share to its shareholders, and the government would receive R16,485 crore on this count, as it holds 90% in the company.
This would not be the first fiscal when the government would fail to meet its disinvestment target, rather the government has missed the target in most years. The government has sold only R1.37 lakh crore worth of PSU shares in the last 23 fiscals, which is just 59% of R2.31 lakh crore it had targetted.
However, the government is also trying to push through the sale of its residual stake in Hindustan Zinc and Balco in FY14. Last week, an inter-ministerial group has begun the valuation process of Hindustan Zinc (HZL) and Balco, which together could fetch R25,000 crore to the coffers. The government had sold majority stakes in the two companies to the Vedanta group in the first half of the last decade.
London-listed Vedanta holds 51% and 64.92% respectively in Balco and HZL. In January 2012, Vedanta had proposed to acquire the government?s remaining stake in the two companies for about R17,275 crore. Vedanta has shareholder consent to mop up shares worth up to R21,636.56 crore for the remaining government stake in HZL and shares worth up to R3,026.14 crore in Balco. Last week, it was reported Vedanta chairman Anil Agarwal met economic affairs secretary Arvind Mayaram and discussed the stake sale in two companies. Agarwal later told reporters that he would bid for the companies if the price offered is lucrative.
Last month, the Cabinet had cleared a stake sale in HZL through the auction route while a decision on Balco is yet to be taken. According to sources, the Cabinet could take up the residual sale in Balco next week.