Budget 2020: Govt raises divestment target two-fold

Budget 2020: Government raises divestment target two-fold

Proposes to sell part of its stake in cash cow LIC

The budget also proposed to sell the remaining stake of the government in IDBI Bank to private, retail and institutional investors through the stock exchange. (Credit: DH Photo)

Sorely behind the targeted tax revenue collections, the Union budget on Saturday relied heavily on its asset sale programme and announced offloading a part of its stake in Life Insurance Corporation, India’s most valuable firm with an asset of over Rs 31 lakh crore.

LIC has rescued the government several times in the past, especially when the tepid market conditions hindered other investors to buy shares in the public companies the government offered to sell.

Check out our full coverage of Union Budget 2020 here 

The government owns 100% stake in LIC and proposes to sell a part of its holding by way of an initial public offer.

“Listing of companies on stock exchanges discipline a company and provides access to financial markets and unlocks its value. It also gives an opportunity for retail investors to participate in the wealth so created,” Finance Minister Nirmala Sitharaman said to a question on LIC stake sale in her post-budget presser.

“LIC stake sale shows the fiscal stress the government is facing at the moment. We have come to a situation, where we are divesting our favourite milch cow. It shows the government’s desperation,” N R Bhanumurthy, senior professor at NIPFP told DH.

According to a recent RBI data, of the proportion of LIC’s investments in public sector entities has shot up to 85% as on March 2019, from about 75% a decade ago.

The budget also sought to double the disinvestment target for 2020-21 to Rs 1.20 lakh crore. In the current year, however, the government failed to realise even a fourth of an estimated Rs 1.05 lakh crore.

With only two months remaining for the financial year to conclude, Sitharaman also announced cutting the asset sale target for the current year ending March 31, to Rs 65,000 crore from an earlier Rs 1.05 lakh crore.

On what gave her the confidence to double the divestment target, she said, “we have done quite a bit of groundwork, on the basis which I can say, we will achieve the target next year. Yes, I agree, we are behind this year but six months down the line I will be able to tell you that we are on target”.

The budget also proposed to sell the remaining stake of the government in IDBI Bank to private, retail and institutional investors through the stock exchange.

DH Newsletter Privacy Policy Get top news in your inbox daily
GET IT
Comments (+)