The disinvestment target in the upcoming union budget for the financial year 2023-24 is likely to be cut to Rs 50,000 crore or even lower from the current fiscal’s budgetary target of Rs 65,000 crore due to challenging market conditions and unlikely ‘bold’ decisions on privatisation ahead of the general elections.
“We pencil in divestment receipts of Rs 350 bn in FY2023E (8M FY23 at Rs 284 bn). For FY2024E, we factor in divestments of Rs 500 bn with the option of LIC, SUUTI holdings, SCI, etc remaining on the cards though outright privatisation prior to general elections will be difficult,” Kotak Institutional Equities said in a pre-budget research note.
For the current financial year 2022-23, the budgeted disinvestment target is Rs 65,000 crore. So far, the government has raised around Rs 31,000 crore from divesting its equities in the central public sector enterprises. The disinvestment target for this fiscal is unlikely to be met. In fact, it is estimated to remain just nearly half of the budgetary target as any big disinvestment is unlikely to happen in the next two months.
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In the past four years, the government has consistently missed the budgetary target to raise money by selling its stakes in PSUs. In the Union budget for 2021-22, presented in February 2021, Finance Minister Nirmala Sitharaman had pegged the proceeds from disinvestments at Rs 1.75 lakh crore. In the revised estimates it was cut to Rs 78,000 crore. However, the actual realisation during that fiscal stood at just Rs 13,531 crore.
Sources said the disinvestment target in the upcoming budget would be more pragmatic. The government is unlikely to pursue PSU disinvestment in an aggressive manner in the next fiscal due to the 2024 general elections. The opposition parties have been attacking Prime Minister Narendra Modi government for the privatisation of PSUs. Given the fact that the elections are just around the corner, the Modi government is unlikely to take any major risk on privatisation.
More than half of the money raised through disinvestment so far in the current financial year is through the initial public offering (IPO) of the Life Insurance Corporation of India (LIC). The government has raised Rs 21,000 crore by selling 3.5 per cent of its stake in LIC.
The PSUs, which have been on the disinvestment list for the past few years include Bharat Petroleum Corporation Limited (BPCL), Shipping Corporation, Bharat Earth Movers Ltd (BEML), Concor, HLL Lifecare and NMDC Steel Ltd. Some of these disinvestments are likely to be completed in the next fiscal. The government is also in the process of selling its stake in IDBI Bank.