Budget 2019: The curious case of failed disinvestment targets

By: |
New Delhi | Updated: Jan 28, 2019 8:18 PM

Budget 2019: In FY18, the budgeted target for disinvestment was Rs 72,500 crore.

Budget 2019, arun jaitley, disinvestment targets, fiscal deficit, ONGC, HPCL, CPSEIn FY18, the budgeted target for disinvestment was Rs 72,500 crore. (Reuters)

Budget 2019: Government of India sets disinvestment targets in most budgets since 1991. Although the chief aim is to add to the exchequer and bridge the fiscal deficit, disinvestment also allows the government to offload its burden by bringing private players onboard.

However, meeting the disinvestment targets has become quite a formidable task. If the last 10 years are anything to go by, the target has been realised just once — in the last financial year 2017-18. That year, not only the government met its target but also surpassed it by quite a margin.

Also read| Priyanka Gandhi can energise the Congress in UP but electoral gains are a far cry

Constant shortfall

In FY18, the budgeted target for disinvestment was Rs 72,500 crore. By the end of the financial year, the proceeds from the disinvestments reached Rs 1 lakh crore. But this success was mainly due to the fact that about Rs 37,000 crore came from a deal in which state-owned ONGC bought the Centre’s 51% equity stake in HPCL.

Previously, the target for FY17 was set at Rs 56,500 crore, but the government was able to only gather proceeds to the tune of Rs 47,743 crore. Strategic disinvestments were undertaken for the first time in 10 years in FY17, which contributed 23% of the total disinvestment receipts, a CARE Ratings report said. On the other hand, 41% of the proceeds came from share buybacks.

Going further back, in FY16 the government had decided to raise Rs 69,500 crore, which was almost Rs 10,000 crore more than the FY15 target. But in both those fiscal years, the government fell short of the mark and managed to raise only Rs 42,132 crore in FY16 and Rs 37,737 crore in FY15. Offer for sale (OFS) dominated the selloff proceeds, which stood at 81% in FY16 of the total, and at 99.7% in FY15.

Danger ahead

Now, in the current financial year 2018-19 too, Finance Minister Arun Jaitley has set an ambitious disinvestment target of Rs 80,000 crore. Out of this, only 43% (Rs 32,142 crore) has been realised till December 2018, according to the CARE Ratings report.

By the end of the fiscal year, the report expects the figure to go only as high as up to Rs 60,000 crore. The report cites volatile conditions in the financial markets as the reason for expected subdued receipts. Out of the receipts that have come so far, 74% were via CPSE Exchange Traded Fund (ETF) led disinvestments.

Do you know What is Finance Bill, Short Term Capital Gains Tax, Fiscal Policy in India, Section 80C of Income Tax Act 1961, Expenditure Budget? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1How Budget 2021 has reduced taxpayers’ rights