Don't set unrealistic disinvestment targets, Parliament panel tells Centre

In the current financial year, the Centre has so far raised only Rs 12,434 crore, including Rs 2,700 crore from Air India

As the government stares at a huge shortfall in disinvestment mop up this year, a parliamentary committee has warned that setting up unrealistic disinvestment targets purely to address budget deficits is not in the best interest of the government and it may lead to value erosion of public sector enterprises stocks due to likely price overhang in anticipation of disinvestment by market-makers.

"Meeting disinvestment targets is pivotal to the budget and wavering from estimates may lead to a quantum change in the fiscal dynamics," the Parliamentary Standing Committee on Finance headed by former minister Jayant Sinha said in a report tabled in Lok Sabha this week.

In the current financial year, the Centre has so far raised only Rs 12,434 crore, including Rs 2,700 crore from the Air India disinvestment. The target for the current financial year (2021-22) ending March 31 was kept at Rs 1,75,000 crore. It was later revised to Rs 78,000, down 56% of the Budget target.

The government hugely depended on the LIC IPO to achieve the revised target of Rs 78,000 crore. However, the LIC IPO is almost deferred to the next financial year due to volatile market conditions owing to the Russia-Ukraine crisis.

A 5% stake sale in LIC could have fetched an estimated upto Rs 70,000 crore, enough to achieve the revised disinvestment receipt target of Rs 78,000 crore.

The positive side is that the government could mobilise about twice the amount estimated for disinvestment in the 2022-23 Budget. For 2022-23, the target has been fixed at Rs 65,000 crore.

Besides LIC, some of the big-ticket strategic sales such as that of BPCL and IDBI Bank, planned for this year could happen in 2022-23.

The committee also underscored the need for the Department of Disinvestment to publish an annual report on how it has managed public assets.

"In particular, DIPAM should highlight whether it is creating value or whether it has eroded value on the annual basis for the general public," the committee said.

Under Prime Minister Narendra Modi's government, disinvestment receipts exceeded the target during 2016-17, 2017-18 and 2018-19, but fell short in 2014-15 and 2019-20.

The Centre garnered Rs 24,349 crore from disinvestment in 2014-15, slipping even on the revised estimate of Rs 26,353 crore, missed the target again in 2015-16 at Rs 23,997 crore against the RE of Rs 25,314 crore. In 2016-17, the Centre got Rs 46,247 crore against the revised estimate of 45,500; in 2017-18, Rs 1,00,057 crore against the revised estimate of Rs 1,00,000 crore; and in 2018-19, it got Rs 84,972 crore against RE of Rs 80,000 crore.

It once again missed the disinvestment target in 2019-20 and got only Rs 50,299 crore against the revised estimate of Rs 65,000 crore.

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