The Government of India is likely to miss its divestment target for the fourth year in a row. In the last Budget, the government had set a divestment target of ₹65,000 crore for FY23 and so far, it has raised only around ₹31,000 crore, which is just a little over 50 percent of its original target.
More than half of the proceeds raised so far from divestment came from the initial public offering of the Life Insurance Corporation of India (LIC), where the government sold a 3.5 percent stake at ₹949 a share, raising ₹21,000 crore. Apart from LIC, the privatisation of Air India and the share sale of ONGC also procured around ₹2,500-3,000 crore each.
Originally, the government was supposed to raise around ₹65,000-70,000 crore through the LIC IPO by selling a 5 percent stake. The issue size was later reduced to 3.5 percent. Despite the reduced size, it was still the biggest IPO the country has ever seen.
The big-ticket privatisation of Bharat Petroleum (BPCL), which was due in FY23, was put on hold due to the volatility in crude oil prices after the Ukraine-Russia war. The COVID scare and global growth concerns leading to major market volatility also hampered the privatisation plans of the Indian government this year.
In FY22 as well, the government missed its original target as well as its revised target by a huge margin. The original divestment target for the previous financial year was ₹1.75 lakh crore, which was later reduced by 55 percent to ₹78,000 crore. However, the government was able to raise just ₹13,531 crore, only 18 percent of the revised target as the initial share sale of LIC was pushed to FY23 to avoid market volatility. This was the lowest mop-up after the disinvestment program was revived in FY10.
In FY21 too, the government missed its divestment target, raising ₹32,742 crore against the original target of ₹2.10 lakh crore. While, in FY20, the government mopped up around ₹50,000 crore against its original target of ₹90,000 crore.
Before FY22, the lowest disinvestment receipts were in FY12 at ₹14,000 crore against the target of ₹40,000 crore. Meanwhile, the highest divestment receipt for the government has been ₹1 lakh crore in FY18 against a target of ₹72,500 crore. A large chunk of this ( ₹36,915 crore) was due to the acquisition of HPCL by ONGC.
Recently, the Department of Investment and Public Asset Management (Dipam) suggested that dividends from public sector undertakings (PSUs) be accounted as divestment collections. This is because they are revenue resources for the government. Currently, PSU dividends received by the Centre are not considered as disinvestment proceeds.
In FY23 till date, Dipam has raised ₹66,046 crore from disinvestment and dividend receipts. Of this, ₹31,106 crore has come as disinvestment receipts and ₹34,940 crore as dividends. If the government announces the dividends to be counted as divestment collections in the upcoming Budget, then the government would have achieved its FY23 target.
The government is likely to divest Rashtriya Ispat Nigam by the end of January, which could add to the divestment receipts for the current financial year. Companies including Tata Steel, Adani group and JSW Steel are said to be interested in RINL.
The other divestments which are likely to be completed in the upcoming financial year include those of IDBI Bank, Shipping Corporation, BEML, NMDC Steel and Pawan Hans.
The government has invited bids to sell its stake in IDBI Bank. However, the process will stretch well into the next financial year.
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