In the last financial year, the government had targeted to raise Rs 67,000 crore through disinvestment.
Indian Union Budget 2021-22: In the midst of the COVID-19 epidemic, it has not been very easy for the Modi government to maintain and increase government spending on infrastructure. The main reason for this is the slowdown in the economy due to the epidemic and the decline in revenue from it. Through disinvestment, the government has been able to achieve about 5 percent of the target so far in the current financial year 2020-21. However, recently Finance Minister Nirmala Sitharaman made it clear that the forthcoming budget 2021-22 will keep the pace of government spending on infrastructure and it will be sure to ensure that the economic revival continues. The Finance Minister also made it clear that disinvestment will now take place on the government’s stake sale program and cases in which companies have received cabinet approval will be taken seriously.
Looking at the government’s trend towards disinvestment targets in the last few years, it is waiting till the last quarter. For the current financial year 2020-21, a target of Rs 2.1 lakh crore has been set through disinvestment in government companies. According to government figures, so far the government has been able to achieve only about Rs 11,000 crore of budgetary target through disinvestment. In the last financial year, the government had targeted to raise Rs 67,000 crore through disinvestment. According to data from the Department of Investment and Public Asset Management (DIPAM), the government has so far sold equity shares in Hindustan Aeronauticals, Bharat Dynamics, Mazgaon Dock Shipbuilders, RITES, SUUTI and IRCTC in the current financial year.
Finance Minister Nirmala Sitharaman had said in an interview recently that the government can increase spending to support the economy, even if it further increases the budget deficit. The government will not decide to reduce the incentive spending (relief package) in a hurry. Apart from this, it will be ensured that all government companies continue capital expenditure. There is a need to increase expenses in the situation like this at the moment and there is no need to be worried about fiscal deficit.
Government should change the strategy of ‘last quarter’
HDFC Bank Chief Economist Abheek Barua says, it is clear that the government’s disinvestment program has got a break due to the COVID 19 epidemic. Another important thing is that despite the boom in the stock market, the government did not see the disinvestment program. That is, somewhere the government’s trust in the market does not seem to be complete. So far, Chal has achieved about 5 per cent of the disinvestment target for the financial year. If the amount can not be raised from disinvestment as per the target, then it will surely have an impact on maintaining or increasing government spending.
Barua says, if she looks at the government trend on the disinvestment program of the last 10 years, she waits till the last quarter. The government should change this strategy. All the stakeholders related to disinvestment should consider it. The Finance Ministry will sit down with the concerned departments to fix a trigger price and proceed to the stake sale. Waiting until the last quarter, there is no guarantee that the steak sale will get a good price.
Cabinet approves share sale in 23 PSUs
Earlier, in July, Finance Minister Nirmala Sitharaman said that the government is working on completing the share sale of about 23 PSUs. Their disinvestment has received cabinet approval. These include disinvestment of Hindustan Prefab, Engineering Projects-India, Scooters India, Bharat Pumps and Compressors, Cement Corporation of India, Pawan Hans, Air India.
The government wants to sell the stake in PSUs at the right price i.e. the proper valuation. Out of the disinvestment target of Rs 2.1 lakh crore, about 1.20 lakh crore can come from disinvestment in government companies while another Rs 90,000 crore can come from share sale in financial institutions. As per RBI data, apart from disinvestment, the government has received $ 1.1 billion investment from FDI in the first half of the current financial year.
Amount received from disinvestment till now