The COVID-19 pandemic driven adverse market conditions have negatively impacted government's disinvestment plans and it raised just Rs 15,220 crore instead of Rs 2.1 lakh crore targeted in the last budget, says the Economic Survey. The focus of the government now is to embark on a significant privatisation exercise of central public sector companies and speeding up big-ticket strategic sale of large ones such as Air India, Bharat Petroleum Corporation (BPCL), Container Corporation of India (CONCOR) and Shipping Corporation of India (SCI).
The disinvestment receipts are the major component of Non-debt Capital receipts. The Budget 2020-21 had envisaged to mobilise Rs 2.1 lakh crore from disinvestment proceeds, of which Rs 90,000 crore was envisaged for disinvestment in financial institutions. As on 20th January, the government has been able to raise Rs 15,220 crore of which Rs 443 crore was raised through Initial Public Offer (IPO) of Mazagaon Dock Shipbuilders Limited (MDL), while Rs 10,169 crore was realised through Offer For Sale (Rs 4,924 crore from Hindustan Aeronautics (HAL), Rs 771 crore from Bharat Dynamics (BDL) and Rs 4474 crore from Indian Railway Catering and Tourism Corporation (IRCTC). The government also raised Rs 2,770 crore from buybacks -- Rs 156 crore from KIOCL, Rs 1,065 crore from NTPC, Rs 173 crore from RITES, and Rs 1,376 crore from NMDC, and Rs 1,838 crore from other transactions.
"During the year, the government announced the Atma Nirbhar Bharat package that sought to redefine public sector participation in commercial enterprises. The government recognises the need for opening up all the sectors to the private sector while public sector enterprises play an important role in strategic areas," the survey said.
Vedanta group and two American funds - Apollo Global and I Squared Capital - submitted expressions of Interest (EoIs) for the acquisition of Bharat Petroleum Corporation (BPCL), the largest of the disinvestments this year. However, the government has not been able to conclude the deal yet and the financial bid for India's second-largest fuel retailer is yet to take place.
The government looks to raise Rs 90,000 crore from the sale of its 53 per cent stake in BPCL. But it will be able to raise just Rs 40,000 crore for its stake, according to the present market capitalisation. The government was to announce the name of the qualified bidders for Air India by January 5, but the delay has forced them to postpone the announcement. Tata Group is among the bidders, who submitted the EoI.
The sale of Container Corporation of India (CONCOR) has additional problems as its major valuation comes from the leased land that it took from Indian Railways at subsidised rates. The government also wanted to divest its 47 per cent stake in IDBI Bank and 10 per cent stake in Life Insurance Corporation of India (LIC), but the processes have met with delays. Overall, the government wanted to sell stakes in two dozen central public sector companies in 2020-21.
In the biggest privatisation drive ever, the government has also been planning to sell its stake in BEML and Shipping Corp of India (SCI). Besides the privatisation, they wanted to cut shareholding in select public sector firms to below 51 per cent to boost revenue collections but that also had been hit by the slowing economy.
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