Disinvestment in India

[op-ed snap] Push for the better

Note4Students

From UPSC perspective, the following things are important :

Prelims level : Disinvestment

Mains level : Current disinvestment India - challenges

Context

The Cabinet Committee on Economic Affairs (CCEA) approved the strategic disinvestment of five public sector enterprises – Bharat Petroleum Corporation Ltd (BPCL), Container Corporation of India Ltd, Shipping Corporation of India, Tehri Hydro Power Development Corporation (THDC) and the North Eastern Electric Power Corporation (NEEPCO).

Disinvestment target

    • 1.05 lakh cr – The proceeds from the stake sales will help the Centre move closer to achieving its disinvestment target of Rs 1.05 lakh crore for this year.
    • Disinvestment so far – only Rs 17,364 crore or 16.5% of its budgeted disinvestment target is met, as per data from the Department of Investment and Public Asset Management(DIPAM).
    • Revenue shortfall – Centre is facing huge shortfalls in both direct and indirect tax revenues. Its gross tax revenues have grown by 1.5% in the first half (April to September) of the current financial year.

Current disinvestment

    • BPCL – Of the five companies, the stake sale in BPCL is likely to be the biggest. The sale will be of interest to both domestic firms and major international players. 
    • The government could fetch around Rs 63,000 crore from its stake sale in the company.
    • Adding proceeds from the sale in the Container Corporation and the Shipping Corporation, Centre may earn more than Rs 70,000 crore through these three firms alone. 

Challenges

    • Less time – With only four months to go, the stake sales may not be wrapped up by the end of the financial year. 
    • Other PSU buying – It should not be another case of public sector firms stepping in to buy these entities to bail out the government. 
    • Transfer of assets – The sale of THDCIL and NEEPCO to NTPC, is essentially a transfer of assets between various arms of the public sector.

Way ahead

    • Plan – The government should draw a more ambitious, better laid out, medium-term plan for disinvestment.
    • Not for revenues – It should not be approached as merely an arrangement for plugging its revenue gaps. 
    • Calendar – It should draw up a list of potential candidates and release an advance calendar, indicating the period of disinvestment. This would help draw in more buyers.
    • Use of proceeds – should be only for the creation of new assets, not to meet its revenue expenditure.

Back2Basics

Disinvestment Policy in India.

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