Govt optimistic about overshooting Rs.45,500 cr divestment target

The Dollar Business Bureau

The current fiscal's divestment target of Rs 45,500 crore is likely to be overshot due to strong equity markets.

In alignment with PM Narendra Modi's motto of 'less government, more governance', the finance ministry has recently approved stake sale in two more PSUs. A good response to the most recent divestment proposals has emboldened the Centre's hopes of surpassing the set target for revenue from divestments by a few thousand crores.

Gains from a better performing stock market have also translated into higher prices for the government's divestment bids. So far, in the current fiscal, the government has sold stake in four PSUs via the Offer for Sale (OFS) route.

In April 2016, a 11.36% stake sale in National Hydroelectric Power Corporation (NHPC) had filled the government coffers with Rs. 2,716 crore. Another 7% sale in Hindustan Copper, in September 2016, raised Rs. 400 crore. In October 2016, sale of 15% stake in NBCC Ltd had earned the treasury a whopping 2,200 crore. The latest stake sale was in MOIL Ltd (formerly Manganese Ore India Limited).

The second tranche of CPSE ETF (Exchange Traded Fund), floated in January 2017, saw an overwhelming response from investors, fetching the government Rs 6,000 crore. The CPSE ETF, a fund of 10 CPSEs mirroring the NSE CPSE index, was launched by the Modi government to enhance earnings from stake sales, which were hitherto met with tepid interest from the public. The government plans to continue the use of CPSE ETF as its disinvestment vehicle in the future.

The administration has repeatedly failed to meet its divestment targets for seven years now. In 2015-16, the original target of Rs 69,500 crore was trimmed later by more than 57% to 30,000 crore, which was also not met. The official budget target for divestment in 2016-17 was Rs 56,500 crore, which was later revised to Rs 45,500 crore. It remains to be seen whether the optimism of the officials reflects in the results this fiscal year.