In her maiden Budget, finance minister Nirmala Sitharaman has set a target of 1.05 lakh crore to be realised from disinvestment proceeds of public sector companies. The target is markedly higher that the 80,000 crore in the previous fiscal and is 5% over the 1 lakh crore target in FY18. Earlier, in the Interim Budget estimates announced in February this year, the government had set a target of 90,000 crore of disinvestment proceeds for FY20.

While strategic disinvestment of select public sector companies will continue to be a priority, Sitharaman has also said that the government is prepared to hold below a 51% stake post divestment. Those cases, she said, would be decided on a case-to-case basis. The government has also said that going forward its stake in a particular public sector enterprise (PSE) will also include stakes of other state-owned enterprises in it.

Over the past 10 years, the performance of government’s disinvestment programme has been a mixed bag, failing to achieve its target on most occasions. In the first five years, during the second term of the United Progressive Alliance government, an average 52.4% of the target was achieved. In the next five, during the Narendra Modi-led government’s first term, 80.5% of the target was achieved. In the last two years, FY18 and FY19, the government exceeded the targets, achieving 101% and 106% respectively. That may well have convinced Sitharaman to up the target.

The confidence perhaps stems from the fact that the government is no longer relying merely on initial public offers (IPO) to garner its disinvestment monies. IPOs are dependent on stock market conditions which has never been consistently bullish in the last decade to raise new capital. The new instrument of choice appears to be Exchange-Traded Funds (ETFs), which have helped the government raise 53% of the targeted disinvestment last year. Apart from ETFs, buybacks and inter-PSU mergers have also contributed to the government kitty. In FY19, three IPOs—IRCON International, RITES and Garden Reach Shipbuilders—hit the market.

However, the government may still have set itself a steep target. In the early rounds of divestment, the government has sold stakes in some of its best companies, and its stakes in some large PSEs like Indian Oil has been reduced to 52%. In FY19, the government had approvals to sell 24 central PSEs, but couldn’t sell even one of them as they were loss-making units. The list included companies like Air India, Hindustan Newsprint, Scooters India, and Hindustan Fluorocarbons.

Though the government may still be able to play with its ETF option after the consolidation of stakes held with different state-owned entities, Sitharaman will need to do some serious thinking to achieve the latest target.

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