Privatisation is dead. Can disinvestment revive India’s fiscal fortunes?

The Narendra Modi government’s bold privatisation pitch in 2021 has faded into silence.

Privatisation of central public sector enterprises (CPSEs) died in 2021-2022. India has not undertaken even one strategic divestment — genuine or to another CPSE — after the Air India sale in January 2022.

Disinvestment was placed on an excruciatingly slow lane in the same year. In the last four years (2021-2025), the government has collected disinvestment receipts of only Rs 31,737 crore per year.

The IDBI Bank stake divestment has lingered on for the last four years; only recently, there has been some activity with the DIPAM secretary making periodic announcements.

Will privatisation remain comatose? Will there be any real action on the disinvestment front? Can the government make up some part of tax giveaways by raising higher disinvestment proceeds?

Privatisation is dead

Budget 2021-2022, presented on February 1, 2021, marked the crescendo of the Narendra Modi government’s privatisation policy and pitch.

Finance Minister Nirmala Sitharaman announced an ambitious privatisation policy, promising to sell or close every non-strategic CPSE, and privatise even CPSEs in strategic sectors, including banking, power, and oil sectors.

In that high noon of the government riding the privatisation high horse, Sitharaman declared that the government would sell off two public sector banks and one public sector general insurance company in 2021-2022 itself, in addition to the IDBI Bank.

Sitharaman additionally listed many big CPSEs — BPCL, CONCOR, SCI, and others — besides Air India to be sold off in 2021-2022. Counting the CPSE chickens to hatch, the government kept the disinvestment budget estimates at a high of Rs 1.75 lakh-crore. Air India was disinvested on January 27, 2022. Thereafter, nothing else moved.

The government did not bring the bank nationalisation amendment law in the 2021 Budget session as promised. The general insurance nationalisation law was amended but not acted upon. No CPSE, strategic or non-strategic, has been privatised in the last four financial years. The IDBI Bank sale has lingered on.

No one in the government talks about privatisation anymore. The government stopped mentioning disinvestment numbers in the Budget. Privatisation is truly and unambiguously dead.

Disinvestment reduced to a trickle

In its first term (2014-2019), the Modi government received Rs 3,17,267 crore in disinvestment receipts, at an average of Rs 63,453 crore a year. In the two years of 2017-2018 and 2018-2019, the disinvestment receipts were Rs 1,00,045 crore and Rs 94,727 crore respectively!

With the government not providing disinvestment numbers in its Budgets, using DIPAM records, on like-to-like basis, disinvestment proceeds in Modi 2.0 (2019-2024), turned out to be Rs 1,48,521 crore, (an average of Rs 29,704 crore per year), only about 47% of Modi 1.0.

In the last three years of Modi 2.0 (2021-2024), the disinvestment receipts were only Rs 53,294 crore, which is not even half of the annual disinvestment receipts in 2017-2018 and 2018-2019.

The DIPAM’s disinvestment receipts include some non-CPSE disinvestment receipts (sale of SUUTI shares, shares held as Enemy Property and SUUTI remittances). Excluding these, the real CPSE disinvestment receipts in Modi 2.0 were only Rs 1,30,831 crore (averaging Rs 26,166 crore a year).

The year 2024-25 has proved no better. The government collected only Rs 10,163 crore as gross disinvestment receipts, whereas actual CPSEs' disinvestment proceeds amounted to Rs 7,810 crore.

Disinvestment was also more or less stalled.

Recent stirring

The government appointed revenue secretary Arunish Chawla as DIPAM secretary in January, possibly to give disinvestment fresh legs. Chawla seems to be infusing some life into the IDBI Bank disinvestment plan. He has been regularly communicating with the media, intimating progress made and setting timelines for inviting financial bids. News reports suggest that the government is planning to sale up to 20% stake in five public sector banks.

There is no visible difference, however, in the matter of disinvestment transactions. In the first six months of 2025-2026, the government has carried out only one disinvestment transaction. It sold 3.61% equity of Mazagaon Dock Shipbuilders for Rs 3,673.42 crore.

Missing opportunity again

The value of the government stake in the market capitalisation of 66 listed non-financial CPSEs (including subsidiaries), as on September 20, is Rs 24.25 lakh-crore, out of the total market capitalisation of Rs 41.48 lakh-crore of these companies. In many of these CPSEs, the government’s stake exceeds 75%.

Likewise, the value of government stake in 16 financial CPSEs — banks, insurance companies, etc. — is Rs 17.39 lakh-crore out of total market capitalisation of Rs 23.69 lakh-crore. In some banks and the LIC, the government stake exceeds 90%.

There is undoubtedly an enormous opportunity for the government to raise Rs 1 lakh-crore to Rs 2 lakh-crore by divesting minority stakes in a few of these 92 listed CPSEs, which can make up for the fiscal hole exceeding Rs 1 lakh-crore created by the government by granting massive tax giveaways in GST and income tax.

The government seems quite unwilling, and has not got its act together. Looks like 2025-2026 will be another year of missed opportunity for India.

Subhash Chandra Garg is former Finance & Economic Affairs Secretary, and author of ‘The Ten Trillion Dream Dented’, ‘Commentary on Budget 2025-2026’, and ‘We Also Make Policy’.

(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH)