Disinvestment Set to Miss FY24 Target, Raises Over Rs 4 Trillion in a Decade

As the specter of impending general elections looms, the government’s privatization endeavors have slowed, opting for caution in the face of potential accusations of selling off national assets. The ambitious disinvestment target for the current fiscal year is likely to be missed, with major plans, including Bharat Petroleum Corporation Ltd (BPCL), Shipping Corporation of India (SCI), and CONCOR, pushed to the backburner. Analysts suggest that substantive privatization may only resume after the April/May elections.

Stalled Privatization Plans

Major privatization plans for entities like Bharat Petroleum Corporation Ltd (BPCL), Shipping Corporation of India (SCI), and CONCOR have been put on hold. Analysts predict that meaningful privatization activities may resume only after the upcoming general elections in April/May.

Current Fiscal Year Performance

Out of the budgeted amount of Rs 51,000 crore for the current fiscal year, only 20% (Rs 10,049 crore) has been collected through minority stake sales via IPO and OFS. Big-ticket privatizations, including those of SCI, NMDC Steel Ltd, BEML, HLL Lifecare, and IDBI Bank, face delays due to ongoing due diligence processes and demerger complexities.

Upcoming Challenges and Transactions

Strategic sales of CPSEs, including IDBI Bank, are likely to spill over into the next financial year due to delays in security clearances and ‘fit & proper’ approvals. Opposition from employee unions poses a challenge to the strategic sale of Rashtriya Ispat Nigam Ltd (RINL).

Government’s Privatization Narrative

Despite successfully privatizing Air India and Neelachal Ispat Nigam Ltd (NINL) in 2022, the government faces obstacles in achieving further CPSE divestments in 2023. The complex nature of strategic sales involving multiple stakeholders contributes to the prolonged timelines.

Historical Disinvestment Trends

Over the past decade, disinvestments have raised around Rs 4.20 trillion, with Rs 3.15 trillion coming from minority stake sales and Rs 69,412 crore from strategic transactions in 10 CPSEs. The lack of progress in the current fiscal year underscores the challenges inherent in the strategic sale process.

Questions Related to Exams

Q: Why is the Indian government likely to miss the disinvestment target in FY24?

A: With general elections approaching, the government opts for caution, delaying major privatizations like BPCL and SCI, contributing to a likely miss on the fiscal year target.

Q: What has been the primary method of disinvestment in the current fiscal year?

A: About 20% of the budgeted amount has been collected through minority stake sales via IPO and OFS.

Q: What challenges are hindering the privatization process for CPSEs like IDBI Bank?

A: Due diligence and demerger of core and non-core assets are incomplete, causing delays in inviting financial bids. Bidders await security and ‘fit & proper’ clearance.

Q: How many transactions are currently being processed by DIPAM?

A: Around 11 transactions are underway at the Department of Investment and Public Asset Management.