It is true a PSU buying another PSU is not quite disinvestment in the traditional sense—and there has been no privatisation so far—but from the point of view of generating revenues for the budget, it is the inflows that matter.
While finance minister Arun Jaitley has hinted at the government missing its fiscal deficit target of 3.2% this year, the great success of the disinvestment programme this year could ensure the slippage is minimal. Right now, based on what information is available, there could be a shortfall of Rs 10,000 crore on account on telecom receipts, another Rs 28,000 on account of lower dividend from RBI, Rs 13,000 crore due to the cut in petroleum excise duty—while that’s over Rs 50,000 crore already, it is not clear as yet whether there will be a shortage on account of GST and, if so, by how much. With the outstanding success of the just-concluded Bharat ETF which netted Rs 14,500 crore, the disinvestment secretary has said the government has already collected Rs 45,500 crore—from IPOs of GIC and New India, the L&T stake-sale, etc—out of the year’s target of Rs 72,500 crore. Add in over Rs 30,000 crore from the sale of HPCL to ONGC and the other OFS’s that are in the pipeline including Oil India and IOC, and the government could well end up with revenues of over Rs 100,000 crore. Add in the 25% or so of extra dividend that PSUs have been asked to shell out, and the slippage of the deficit could pretty much be negligible provided there is no major gap in terms of GST collections.
It is true a PSU buying another PSU is not quite disinvestment in the traditional sense—and there has been no privatisation so far—but from the point of view of generating revenues for the budget, it is the inflows that matter. Another argument made is that this is akin to selling the family silver to pay the grocer, but this is missing the point. With private sector investments, especially in infrastructure grinding to a halt, and the government stepping up to try and fill in the gap, selling PSU stocks to make good the gap is nothing but an asset-swap, selling old government assets to pay for new ones like roads and railway tracks. Since the government has a lot more scope to sell assets—lowering the government stake to 51% in 69 PSUs could fetch a whopping Rs 2.72 lakh crore—it would be a good idea to try and get even more than Rs 1 lakh crore from disinvestment and use that to balance the budget. It is true the NK Singh committee allowed the government a 0.5 ppt of GDP as a cushion for the fiscal deficit due to one-time shocks like the GST, but bond markets will be a lot more comfortable if the overrun on the deficit is kept to the minimum.