India falls short of original FY17 divestment aim, but record Rs 46,247 cr haul boosts confidence

By: | Published: March 31, 2017 6:13 PM

The government raised Rs 46,247 crore through disinvestment in the financial year 2016-17, the highest ever amount earned by sale of equity stake in PSUs (public sector undertakings), though falling short of the original target, as expected.

The record money raised in FY2016-17 could boost the government confidence to meet its even more ambitious target of raising Rs 72,500 crore through disinvestment in the next financial year 2017-18.

The government raised Rs 46,247 crore through disinvestment in the financial year 2016-17, the highest ever amount earned by sale of equity stake in PSUs (public sector undertakings), though falling short of the original target, as expected.

Earlier last year, in Union Budget 2016, the government had set a target to raise Rs 56,500 crore by divesting stake in state-run companies in order to help fund expenses and bridge fiscal deficit. However, Finance Minister Arun Jaitley later revised the target down to Rs 45,500 crore in the Budget 2017.

The record money raised in FY2016-17, which ends today, could boost the government confidence to meet its even more ambitious target of raising Rs 72,500 crore through disinvestment in the next financial year 2017-18.

Notably, India has repeatedly fallen short of realising its disinvestment targets in the past, even though the amount of money raised has constantly increased for the last six years. India raised Rs 42,132 crore in the last financial year 2015-16, and Rs 37,737 crore in the previous fiscal 2014-15.

Among the marquee disinvestment sales this year, the government raised Rs 8,500 crore through two follow-on offers of its CPSE ETF – the exchange-traded fund of the Central Public Sector Enterprises. The CPSE ETF, which mirrors the performance of the CPSE index, invests in 10 PSUs, namely, ONGC, Coal India, Indian Oil Corp, Gail India, Oil India, Power Finance Corp, Bharat Electronics, Rural Electrification Corp, Engineers India and Container Corporation of India.

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Other companies in which the government sold stake this year include NALCO, NHPC, NMDC, NBCC, Coal India. In several cases the government sold the stakes back to companies through share buybacks. Further, the government realised Rs 6,682 crore by selling its strategic stake in the tobacco and FMCG major ITC Ltd, which it held in the company through SUUTI (Specified Undertaking of Unit Trust of India). Similarly, it raise Rs 2,096 crore through selling SUUTI’s stake in Axis Bank.

For the next financial year, the government has an ambitious plan for raising funds through disinvestment. It plans to launch its second CPSE ETF, and also seeks to sell 10% equity stake each in three major state-run railway companies IRCTC, Ircon and IRFC via an IPO (initial public offer). The Ministry of Railways has listed a total of nine units for likely IPO.

The Union Cabinet has also approved listing of five state-run general insurance companies, which is likely to begin only in the next financial year with the first listing possible by September-October. Further the government is also looking at selling 10% equity stakes each in the capital goods major Bharat Heavy Electricals Ltd and energy company Oil India Ltd.

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