Budget 2019: These PSU white elephants may help govt in meeting ambitious disinvestment target

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Updated: July 5, 2019 5:40:24 PM

Union Budget 2019 India: Finance Minister Nirmala Sitharaman on Friday raised the disinvestment target a tad over a lakh of crores for FY20, saying the government will re-start stake sale not only in Air India but for other CPSEs too.

Budget 2019, Union Budget 2019 India, Budget 2019 India, Budget 2019-20,Union Budget 2019 India: A target of Rs 1, 05,000 crore was set by the government as against Rs 90,000 crore in the interim Budget presented in February 2019.

Union Budget 2019 India: Finance Minister Nirmala Sitharaman on Friday raised the disinvestment target a tad over a lakh of crores for FY20, saying the government will re-start stake sale not only in Air India but for other CPSEs too. A target of Rs 1, 05,000 crore was set by the government as against Rs 90,000 crore in the interim Budget presented in February 2019. “Strategic disinvestment of select Central Public Sector Enterprises (CPSEs) will continue to be a priority. Strategic disinvestment of Air India will re-initiate. 1 lakh 5000 rupees is disinvestment target for 2019-20,” she said.

Such an ambitious divestment target indicates that the Modi government is eyeing proceeds from stake sale in CPSEs so as to increase revenue amid uncertainty over tax collections, experts said.  The government may also go below from 51 per cent to an appropriate level of the ownership stake in non-financial public sector undertakings on a case by case basis, the finance minister also said in the budget speech.

“To meet the target of Rs 1.05 lkh crore of disinvestment it is more likely that the government will follow the dual path of using ETFs of CPSEs to sell stake and also have PSUs invest their surpluses in other PSUs. Air India will be a tough one given the legacy issues of staff, efficiency and debt costs. As specified by the FM the non-financial companies would be the ones to be pursued,” Madan Sabnavis, CARE Ratings, told Financial Express Online.

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“I think the government shifting of tax status of CPSC etf similar to ELSS can help achieve the target of divestment. Considering holding of companies such as LIC in overall limits of minimum holding in PSU will help creating space for reducing stake in some of the Public Sector Undertakings. In my view, it would be difficult for the government to get buyers for the while elephants easily,” Abhimanyu Sofat, IIFL,  told Financial Express Online.

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However, it may be able to get interest for companies such as IRCTC and the government recently has also started inviting bids for specific plants from companies such as SAIL to get more cash flow for these companies, he added.

“The speed with which the disinvestment programme kicks off, as well as the interest shown by potential buyers in the PSUs being offered for strategic disinvestment, will be crucial to prevent a slippage relative to the target,” Aditi Nayar, ICRA, told Financial Express Online.

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