Budget 2020: Disinvestment target doubled; it is ambitious and daunting, but is it achievable?

By: and |
February 1, 2020 6:42 PM

Budget 2020-21: Next fiscal’s disinvestment target is double of the Rs 1.05 lakh crore that the government had expected to earn this fiscal from sale of equity stakes in PSUs

Budget 2020 India: Finance Minister Nirmala Sitharaman has proposed an ambitious disinvestment target of PSU stake sales to the tune of Rs 2.1 lakh crore in the next financial year 2020-21, even as it is not even close to meeting its current year’s divestment goals. Next fiscal’s disinvestment target is double of the Rs 1.05 lakh crore that the government had expected to earn this fiscal from sale of equity stakes in PSUs. However, the target is ambitious, challenging and daunting, most experts said. The government has proposed to sell a part of its holding in LIC through IPO hoping that along with Air India, BPCL and others, it will contribute substantially to the divestment target of FY21. The government has managed to make divestments worth Rs 18,094.59 crore so far in the current fiscal year, which is less than one-fifth of the budgeted amount. Here’s what experts have to say about the possibility of the government meeting the next year’s target.

Watch Video: What is Union Budget of India?

Mission Impossible?

  • “It is possible only if BPCL happens. LIC could also net the government Rs 20-30,000 crore. Most listed PSU stock prices are depressed and without strategic disinvestment of at least 4-5 companies this target is not achievable,” investment advisor Sandip Sabharwal told Financial Express Online.
  • “It surely looks like an ambitious target, however with LIC being thrown into the candidates for disinvestment along with Air India and some of the PSU banks, this target could become achievable. Also, with the fiscal room with the government really getting squeezed significantly, there would be tremendous pressure and motivation for the government to meet this target in the coming year,” Siddharth Shah, Partner, Khaitan & Co said.
  • “Divestment target is daunting and challenging. If we see the past record it is very difficult as no strategy has been given for this. Even the current year divestment of Rs 1 lakh crore is falling way behind the target and hence the target of Rs 2.1 lakh crores is indeed very high and ambitious,” Rakesh Nangia, Chairman, Nangia Andersen Consulting said.

In another move, the government earlier this week, announced sale of 100 per cent stake in Air India as it issued the preliminary bid document for the strategic disinvestment with the deadline for submitting expression of interest set as March 17, 2020. As a part of the strategic disinvestment, Air India would also sell 100 per cent stake in low-cost airline Air India Express and 50 per cent shareholding in joint venture AISATS.

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.