After 2009-10, this fiscal may be the first time government would be able to meet the disinvestment target, as budgeted, said an SBI research report, Ecowrap.
Earlier this year, when the government set a steep disinvestment target of Rs 72,500 crore, it was dismissed as just wishful thinking. The BJP government, which took over the reins three years ago, did not achieve the targets it set in its first two years.
Analysts were also skeptical. After the target was set, Aditi Nayar, senior economist at rating agency ICRA Ltd had said, “The target of Rs 72,500 for FY2018 appears optimistic at this juncture.”
However, in the current year, the government has already raised about Rs 19,759 crore through minority sales in Central Public Sector Enterprises (CPSEs) and strategic divestment. Further, the takeover of Hindustan Petroleum (HPCL) by Oil and Natural Gas Commission (ONGC) is expected to garner Rs 30,000 crore , while the divestment in GIC has raised Rs 10,062 crore for the government.
The government is also planning to sell its entire state in Hospital Service Consultancy (HSCC), Engineering Projects (India) Ltd (EPI) and National Projects Construction (NPCCP to a similarly-placed CPSE.
Achieving divestment targets will clearly be a depature from past performance. Since the idea of divestment was mooted first in 1992-93, the respective governments of the day failed to meet targets in all but three in a span of 16 years. In most years, the gap between targets has been as high as Rs 20, 000 crore.
The SBI report noted that the government will be able to meet the divestment target of Rs 72,500 crore as Rs 60,000 crore has already been realized or soon to be realized and hence the fear of low divestment receipts is “completely unwarranted”.
Achieving the divestment target will further help the government achieving another goal – its fiscal deficit target of 3.2% this financial year. “Fiscal deficit target of 3.2 per cent in FY18 seems not difficult, as revenue may be lower than budgeted, but more than offset by disinvestment and expenditure cuts,” said the report.
The report, however, noted that to manage the fiscal deficit, the government needs to cut expenditure substantially. “We estimate that government may cut around Rs70,000 crore from capital expenditure and Rs38,000 crore from revenue expenditure compared to budget estimate of FY18. With this, the fiscal deficit will stay at the same level,” it said.