The government sets a record divestment target, both in profitable PSUs and losses

NEW DELHI: The government has set an ambitious target to raise a record of Rs 1.05 lakh in this fiscal year by selling its stake in some central-sector public sector companies (CPSE) that generate profit and loss, including Air India. This is 17% higher than the target of Rs 90,000 crore established in the interim budget presented on February 1st.

The strategic divestment of selected CPSE would continue to be a priority for this government. Given the current macroeconomic parameters, the government will not only restart Air India's strategic disinvestment process, but also offer more CPSE for the strategic participation of the private sector. The Government will carry out the strategic sale of PSUs. The government will also continue to consolidate energy supply units in the non-financial space, said FM Nirmala Sitharaman in his inaugural speech on the budget on Friday.

In the last fiscal year, the government exceeded its stated goal of increasing Rs 80,000 crore by divesting Rs 5,000 crore with the help of revenues from Coal India and Bharat Heavy Electricals Ltd (BHEL).

This fiscal year the government will try to sell 24 companies with losses such as AI, Hindustan Fluorocarbons, Hindustan Prefabricates and India Scooters. We are not considering only PSUs that generate losses for this and we could sell the participation in some profitable ones as well. The idea is to allow the retail investor to own these profitable companies and create wealth for themselves, said a senior finance ministry official after the Budget.

The FM's speech said the same thing. The government intends to continue promoting retail participation in the CPSE, which lately has shown a very encouraging upward trend. She said that in order to provide additional investment space, the government would realign its participation in CPSE, including banks to allow greater availability of its shares and improve the depth of its market.

Sitharaman also said that the government will review its current policy of not allowing state participation to fall below 51% by divesting non-financial PSUs. This proposal was pending with the government for the last three years or so, since the investment and public asset management department had refused to accept NITI Aayog's recommendations, citing problems with implementation, especially in the case of the designation of executive directors. However, the government will continue to own at least 51% of the public sector banks.

The move to include the holdings of energy supply units in the calculation of 51% of the shareholding may result in financial institutions such as LICs and other state entities that are requested to store shares on behalf of the government, and the sale of the participation to these entities is included in the disinvestment receipts.