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India 95% Short Of Divestment Target With Over Three Months To Go

Against a divestment target of Rs 1.75 lakh crore for FY22, the government has so far raised Rs 9,240 crore.

<div class="paragraphs"><p>A man strikes a yoga pose as the South Block, which houses the Prime Minister’s Office and Ministries of Defence and External Affairs, and the North Block, right, which houses Ministries of Finance and Home Affairs, in New Delhi in May 2019. (Photographer: T. Narayan/Bloomberg)</p></div>
A man strikes a yoga pose as the South Block, which houses the Prime Minister’s Office and Ministries of Defence and External Affairs, and the North Block, right, which houses Ministries of Finance and Home Affairs, in New Delhi in May 2019. (Photographer: T. Narayan/Bloomberg)

The central government is still 95% short of its divestment target even as the third quarter of the ongoing financial year nears completion.

The government has raised Rs 9,240 crore through sale of stake in seven central public sector enterprises as of December, according to the Department of Investment and Public Asset Management. It has budgeted Rs 1.75 lakh crore from divestment in FY22.

Asset sales are key to bridging the government’s budget gap. India targets to bring the fiscal deficit to 6.8% of the GDP in the year ending March 2022, down from 9.5% in 2020-21.

Queries emailed to DIPAM remained unanswered.

Pending, Completed Divestments

In October, the government sold Air India to the Tata Group for an enterprise value of Rs 18,000 crore. However, only about 15% of that, or Rs 2,700 crore, will go to the government. The rest will be used to repay the carrier's debt.

Big-ticket divestments that remain pending include initial public offering of the country's largest insurer Life Insurance Corp., and privatisation of IDBI Bank Ltd., oil refiner, marketer Bharat Petroleum Corp., and helicopter services operator Pawan Hans Ltd., among others.

"Expression of interests have been received (for BPCL)," the government said in a Lok Sabha response on Dec. 13. "The shortlisted bidders have been allowed to conduct due diligence. The timeline is dependent on successful outcome of different stages of transaction."

Investor discussions are on for LIC's IPO, according to a person privy to the development. The person, speaking on the condition of anonymity, said the government has even shortlisted a public relations firm and is also working on the draft prospectus.

The government has appointed 10 merchant bankers, including Goldman Sachs (India) Securities, Citigroup Global Markets India, Nomura Financial Advisory and Securities India, SBI Capital Market, JM Financial, Axis Capital, BofA Securities, JP Morgan India, ICICI Securities, and Kotak Mahindra Capital Co. to manage LIC's IPO, according to a circular on DIPAM's website.

The Finance Ministry on Tuesday also invited global bids for the strategic sale of Projects & Development India Ltd. and HLL Lifecare Ltd.

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Pandemic Setback

The government mopped up Rs 32,835 crore from CPSE share sale and buybacks in the preceding fiscal. That was much lower than the record Rs 2.10 lakh crore originally budgeted. It was, however, scaled down to Rs 32,000 crore as the Covid-19 pandemic delayed planned disinvestments.

Finance Minister Nirmala Sitharaman, in her last budget speech, said the government aims to use disinvestment proceeds to finance social sector and developmental programmes, besides infusing private capital, technology and best management practices.

"A number of transactions—Bharat Petroleum Corp., Air India, Shipping Corp. of India, Container Corp. of India, IDBI Bank, BEML, Pawan Hans and Neelachal Ispat Nigam Ltd.—among others are proposed to be completed in FY 2021-22," she told parliament.

India approved a new public sector enterprises policy to drive privatisation. The government is identifying strategic sectors where it will retain a maximum of four public sector enterprises. In others, it will steadily privatise state-owned units.