Budget 2020: Will the government set aggressive disinvestment targets for FY21? FE Survey

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Updated: January 30, 2020 9:52 PM

Union Budget 2020 India: When Finance Minister Nirmala Sitharaman announced that the government aims to earn Rs 1,05,000 crore from selling equity stakes in PSU companies, it was clear that the government is trying to boost its revenues to keep the fiscal deficit in check and make up for the shortcomings in tax collection.

Budget 2020, Union Budget 2020 India, Budget 2020-21, Budget 2020 India, oil ministry, dharmendra pradhan, nirmala sitharaman, GST, natural gas,Budget 2020-21: A common belief among the 12 economists and analysts polled is that the government does not start the disinvestment and strategic sale of CPSEs at the right time.

Budget 2020 India: When Finance Minister Nirmala Sitharaman announced that the government aims to earn Rs 1,05,000 crore from selling equity stakes in PSU companies, it was clear that the government is trying to boost its revenues to keep the fiscal deficit in check and make up for the shortcomings in tax collection. However, the failure on behalf of the government to even reach one-fourth of the target has left many thinking what will Nirmala Sitharaman’s ‘bahi-khata’ hold this time with regard to disinvestment. Almost all of the experts surveyed by Financial Express Online expect the government to set an aggressive disinvestment target for the next financial year 2020-21.

A common belief among the 13 economists and analysts polled is that the government does not start the disinvestment and strategic sale of CPSEs at the right time. Bidisha Ganguly, Principal Economist, CII, said that strategic divestment requires time as finding the correct investors is not an easy task. “The government is unable to plan its divestment strategy at the beginning of the year. Strategic divestment requires time as it is not easy to find the right investor,” she added.

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While the strategic sale measures announced by the Finance Minister this fiscal were encouraging, DBS Bank’s Senior Vice President & Economist Radhika Rao said that due diligence and operational requirements required prior to putting the stakes on sale require sufficient time. Hence, Radhika Rao is of the firm belief that FY21 is likely to see most of the previously chalked out plans fructify. State-run oil refiner BPCL, and national carrier Air India were among the big entities kept on the block by the central government for disinvestment this year, but are yet to see any progress on sale.

The Government should exit all non-strategic businesses and leave the regular businesses to be run by the private sector, Grant Thorton’s Vikas Vasal told Financial Express Online. “The process should be on-going one and should start now,” he added. DK Srivastava, Chief Policy Advisor, EY shared similar views. “The problem is that the government doesn’t start right at the beginning of the financial year,” he said.

A large private financier too weighed in, saying that the government will up-the-ante when it comes to disinvestment targets this time around. The lender said that disinvestment will be a major tool to bridge the fiscal. Indranil Pan, Group Economist, IDFC FIRST Bank, said that the budgeted target for disinvestments is likely to be placed at Rs 1.3 lakh crore. With the government being able to achieve only Rs 18,094 crore of its budgeted target of Rs 1,05,000 crore in the current financial year, most of the unsuccessful sales are likely to fall in the upcoming budget. Mahindra Group’s Chief Economist, Sachchidanand Shukla said that the problem lies with the blueprints. He added, “There is no effective deal available, for example, Air India till now is not an attractive proposition.”

Madan Sabnavis, Chief Economist, CARE Ratings was the sole dissenter among those polled by Financial Express Online. Sabnavis is of the firm belief that the disinvestment target will be retained at last year’s level. He went on to say, “Problem is selling good companies on attractive terms to evince interest and get (a) proper valuation.” In the current economic condition when India is facing one of the worst downturn in recent memory, non-tax revenues can prove to be major breathers for the government. Selling minority shares in a public enterprise or selling its entire stake in one could help bump up the government’s kitty and in turn push spending even when the government is looking to stick to the budgeted fiscal deficit target.

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