Budget documents not likely to find space for ‘Disinvestment’

The full Union Budget is unlikely to mention the word ‘disinvestment’ and hence continue with the language of the interim budget. This indicates the government focus on enhancing the value of Central Public Sector Enterprises (CPSE) or Financial Institutions, rather than selling part of equity holding.

The word ‘disinvestment’ has long been part of Union Budget documents. Going by the budget documents over the years, the word ‘disinvestment’ was used for the first time in the full budget of 1991-92 and the target was ₹2500 crore which rose to an all-time high of ₹2.10 lakh crore (comprising sales of Government stake in CPSE and also stake in Public Sector Banks and Financial Institutions).

Maximum realization through disinvestment has been little over ₹1 lakh crore in 2017-18.

“We firmly believe that disinvestment is not a tool to bridge the fiscal deficit. That is why we may continue with interim budget provision on this issue,” a senior Government official told businessline.

He also mentioned that when an estimate is given in the budget for disinvestment, most economists start saying if this estimate is missed, there will be pressure on fiscal deficit. “This should not happen as it creates undue pressure on the government,” he said.

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Does this also mean, privatization of CPSE will be on back burner? The official indicated that the process might continue, but it would not be speedy.

It may be noted that the new PSE policy, announced first as part of Atmanirbhar Bharat in 2020, aims to minimise presence of CPSEs including financial institutions and creating new investment space for private sector. Under this, various sectors have been classified as strategic and non-strategic sectors.

The strategic sectors classified include Atomic Energy, Space and Defence, Transport and Telecommunications Power, Petroleum, Coal and other minerals Banking, Insurance and financial services.

In strategic sectors, there will be bare minimum presence of the public sector enterprises. The remaining CPSEs in the strategic sector will be privatised or merged or  subsidiarizeswith other CPSEs or closed. In non-strategic sectors, CPSEs will be privatised, otherwise shall be closed.

The interim budget has a regular head under capital receipt titled ‘Miscellaneous Capital Receipts’ but without mentioning ‘disinvestment’. Also, the explanation reads “These include receipts on account of management of equity investments and public assets through various mechanisms.”

Earlier, the word ‘disinvestment’ used to be specifically mentioned under the head ‘Miscellaneous Capital Receipts.’

The aggregate capital receipts from disinvestment or strategic divestment have constituted about 2 per cent of the Central Government’s non-debt revenue and capital receipts during the last twenty-five years. For example, the disinvestment receipts during this period have a little over ₹5 lakh crores, i.e., about 20,000 crores per year.

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The official, quoted above, said that the effort is on valuation. “Once you see stake, you get money once. However, the value addition helps you to get money through dividends on a sustained basis over the years,” he said.

According to DIPAM, since the introduction of the New PSE policy in January 2021, the NSE CPSE and BSE CPSE Indices have surpassed benchmarks, showcasing returns of 160.49 per cent and 128.66 per cent respectively, until November 2023.