Opposition Parties Caution Government Against Going Ahead With Disinvestment Amid Pandemic
The Indian Parliament building in New Delhi, India (Photographer: Pankaj Nangia/Bloomberg)

Opposition Parties Caution Government Against Going Ahead With Disinvestment Amid Pandemic


Opposition parties in Rajya Sabha on Wednesday urged the government not to go ahead with its ambitious disinvestment plan, saying it would not yield the desired results due to the coronavirus pandemic.

Participating in a discussion on the Finance Bill 2021, Nationalist Congress Party leader Praful Patel said that while disinvestment is a core theme of this Budget, the government should proceed cautiously on it, given the backdrop of the pandemic.

The government on Monday budgeted Rs 1.75 lakh crore from stake sale in public sector companies and financial institutions, including two PSU banks and one insurance company, in 2021-22.

For 2020-21, the government had set a target of raising Rs 2.1 lakh crore from privatisation and sale of minority stakes in state-owned companies. This includes Rs 1.20 lakh crore from selling stake in CPSEs and Rs 90,000 crore from stake sale in financial investment.

So far this fiscal, the government has garnered around Rs 31,000 crore through divestment in PSUs, according to the latest update on the portal of the Department of Investment and Public Asset Management.

Emphasising that he is not against divestment, Patel, however, questioned the "timing" and said the exercise may not yield the best possible results that the government is hoping for.

"I worry because of the Covid-19 situation, you may not be able to realise the full value, so you should go cautiously into it," he said.

Also read: Privatisation Files: Modi’s Flagship Policy Faces Pushback From Key Ministries — BQ Exclusive

Patel claimed that the disinvestment process had "not been resounding success so far".

"I am not against disinvestment at all. But I want to remind you that in the last 1-2 years if you see the divestment process, you have said our collection is as per target. But if you go into the fine print, proceeds have come from where? LIC or another PSU. There is hardly any money you have recovered from the market or private source," he said.

On GST, he said many states were facing the problem of delay in payment. "As we speak, there is a large number of recoveries of GST to be made by states," he said.

Despite a firm assurance by the Centre in the past that states will not be worse off, somewhere down the line, those assurances have been reneged on, he said and referred to the issue of guarantee of minimum collection.

"In Finance Committee, we have asked this question to your officers and we have been told that nothing of that sort exists, whatever is collected, you will get it. There is no guarantee of minimum collection, which would have been given to states as was promised in the House during the passage of the GST Council Bill," he said, urging the government to consider corrective action.

Manoj Kumar Jha said that while the need to raise revenue is understandable, must it be done "by entering into the brazen sale of public assets."

"Every third day I get representation from Vizag Steel plant...there is representation by bank employees... When you take decisions, it impacts the relations and identity of the employees of those organisations. Why not have a dialogue with them," Jha said.

Also read: Strategic Sale To Be Primary Mode For Divestment State-Run Firms: Anurag Thakur

On the disinvestment target for 2021-22, Congress Member Rajeev Satav said it is very ambitious and the government has not met the targets in recent years.

"If the disinvestment target is not achieved then the deficit would grow," he added.

Even the CAG in one of its reports had said some disinvestments have only resulted in the transfer of resources within the public sector and did not lead to any change in the public sector, Satav said.

Citing the sale of oil PSU Hindustan Petroleum Corp. Ltd. to another government-run Oil and Natural Gas Corp. Ltd., Satav said the government was merely transferring assets of one public enterprise to another.

Over the government's policy on disinvestment, BJP member Jyotiraditya Scindia said some PSUs have become a liability.

"The government is doing disinvestment of capital assets. It is not selling the country but making efforts to develop the nation," he said alleging that the opposition is doing politics even at the time of such crisis, while the government is striving for the country's development.

V. Vijayasai Reddy was not in favour of disinvestment plans particularly for Vizag steel plant and also demanded special status for Andhra Pradesh.

Others who spoke included Ram Gopal Yadav (SP), T K S Elangovan (DMK), Amar Patnaik (BJD) Ram Nath Thakur (JD-U), Ram Gopal Yadav (SP), and Jharna Das Baidya, (CPI-M) and Arpita Ghosh (TMC).

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.