Budget 2019-20: Disinvestment Target Set At ₹1.05 Lakh Crore

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By Moderator July 6, 2019 12:45

The government has set itself a target of ₹1,05,000 crore for disinvestment target proceeds for the financial year 2019-20.

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  • The target is markedly higher than the ₹80,000 crore in the previous fiscal and is 5% over the ₹1 lakh crore target in FY18.
  • Earlier, in the Interim Budget estimates announced in February this year, the government had set a target of ₹ 90,000 crores of disinvestment target proceeds for FY20.

Ways to achieve the target

  • The government will undertake a strategic sale of PSUs.
    • The government is considering, in the case where the undertaking is still to be retained in government control, to go below 51% to an appropriate level on a case-to-case basis.
    • It has also decided that 51% of government control will be calculated after including the stake owned by government-controlled institutions.
      • For example, if this proposal is passed without modification, the government can reduce its shareholding in a PSU too, say, 40% from 51%, with the remaining 11% being owned by the LIC or any other government-controlled institution.
    • The government will also continue to do consolidation of PSUs in the non-financial space as well.
      • The government is no longer relying merely on initial public offers (IPO) to garner its disinvestment target. IPOs are dependent on stock market conditions which have never been consistently bullish in the last decade to raise new capital.
      • The new instrument of choice appears to be Exchange-Traded Funds (ETFs), which have helped the government raise 53% of the targeted disinvestment target last year.
      • Apart from ETFs, buybacks and inter-PSU mergers have also contributed to the government kitty.
      • In FY19, three IPOs—IRCON International, RITES and Garden Reach Shipbuilders—hit the market.

Issues

  • Over the past 10 years, the performance of the government’s disinvestment target program has been a mixed bag, failing to achieve its target on most occasions.
    • In the first five years, an average 52.4% of the target was achieved.
    • In the next five, 80.5% of the target was achieved.
    • In the last two years, FY18 and FY19, the government exceeded the targets, achieving 101% and 106% respectively.
  • In FY19, the government had approvals to sell 24 central PSEs, but couldn’t sell even one of them as they were loss-making units.
    • The list included companies like Air India, Hindustan Newsprint, Scooters India, and Hindustan Fluorocarbons.

Also read: Economic Survey 2018-2019 Analysis

Union Budget 2019-20 – Full Explanation

Source

Moderator
By Moderator July 6, 2019 12:45