DIVESTMENT TARGET – TOO FAR AWAY

about 1 month ago
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A year ago, the Govt was so optimistic; with the halo of the previous successes of the PSU Divestments still hovering around, the target was increased to over Rs.1.05 lakh crore for FY20. Now with the going not as good as expected, stake sales hitting rough bumps, there is news that the target might now be revised downwards by around Rs.40,000 crore.

The downward revision might be announced on 1st Feb in the Union Budget. Either an annual downward revision might come in or instead of an annual target, the Govt might go for an overall long term divestment programme for five years.

So far this fiscal, with a little more than two months to go, the divestment road does looks long and winding. Till date, of the Rs.1.05 lakh crore target, some Rs.18,000 crore is all that has come into the kitty. Naturally, it will have to look for ways to mend this situation – by hook or by crook!

In the next two months, it hopes to complete offer-for-sale (OFS) of about 10 PSUs and raise Rs.40,000 crore. It was banking mainly on the 100% stake sake in Air India and 53% in BPCL. Air India received a very tepid response with not even a handful of bidders. BPCL remained grounded due to the resistance from trade union. This this being the case, naturally, the math has gone all haywire.

It will now look for other sources. It has already taken whatever it cane from the RBI last fiscal. So its once again back to PSUs, demanding they pay higher dividend despite profitability or loss. There are reports that the Govt has asked OMCs get either give the same dividend it paid last year or increase it. Reports are that Govt has asked ONGC to pay around Rs.6500 crore, Indian Oil around Rs.5500 crore. It expects Rs.2500 crore from BPCL, Rs.2000 crore from GAIL, Rs.1500 crore from Oil India and Rs.1000 crore from Engineers India.

More than buyback the Govt truly needs to work on selling surplus assets like unused or misused public land and minerals, non-strategic PSUs including sick and loss-making public sector companies. It is wasteful for the govt to own any surplus public asset and we really need to have a roadmap to achieve proper disinvestment and return public wealth to every citizen. Why can’t this be followed instead of bleeding dry the profitable PSUs?

The Govt is very focused on how Moody’s or S&P or Fitch rates India and of course, the Ease of Doing Business Index!  And the FIIs are in turn focused on the fiscal deficit. Thus the Govt will do anything to meet the divestment target and get the fiscal deficit in control. Lets see how they play down this complete failure to meet the divestment target. Surely there is bound to be something it will do to save face….

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