Disinvestment handled well, says FinMin in its report card

Meeting the disinvestment target of Rs 69,500 crore for the current financial year looks uncertain but the finance ministry has given a pat on its own back insofar as its handling of stake sale in public sector units (PSUs) is concerned.

“...The government disinvestment programme has done better than the private sector,” it has said in a year-end report on the department of disinvestment (DoD).   It said although PSUs comprise only 12 per cent of the total market capitalisation, their divestment accounted for 71 per cent (Rs 12,700 crore) of the Rs 17,800 crore raised from the market in the first six months of this financial year (April to end-September).

The ministry had set a target of raising Rs 69,500 crore from disinvestment in the years’ Budget Estimate (BE). This was to comprise Rs 41,000 crore from divestment of central public sector enterprises (CPSEs) and Rs 28,500 crore from strategic disinvestment.

Of this, only Rs 12,700 crore has come, through four Offer For Sale (OFS) issues in the year’s first half — in Rural Electrification Corporation, Power Finance Corporation, Dredging Corporation and Indian Oil Corporation.

However, the ministry said, this itself is a record when compared with the average of less than two issues a year, the amount being Rs 1,458 crore, raised between 2009-10 and 2014-15.  

“This is not only the highest of the corresponding period of any year in the past but is also higher than the average realisation for the entire financial year between 2000-2014,” it said.

The ministry said keeping in view the budgeted target for 2015-16, the DoD has created a pipeline of proposals for CPSEs, at different stages of  approval. Beside, it has fast-tracked the approval process, maintained secrecy to prevent hammering of stocks in the market and changed the system for engagement of intermediaries, to speed transactions.

Beside, disinvestment was made more inclusive by reserving a fifth of the shares on PSU-OFS transactions, on a case to case basis. Before 2014-15, the approach was based on identification of stocks on an annual plan basis. This often resulted in problems like delay in approaching the market, hammering of stocks, overhang and lack of flexibility in divestment.

To address these problems, in the last two quarters of  2014-15, a rolling plan approach was adopted. With advance preparation, planning, fast-tracking the approval process and maintaining of secrecy.   Another year-ender report on the department of expenditure said states have been allowed borrowing permission on a quarterly basis, to spread out their debt raising evenly over 2015-16, avoiding bunching at the last moment. This would help them borrow at competitive interest rates.

During 2015-16 (up to this Tuesday, states were permitted to raise a total of Rs 312,861 crore as compared to Rs 217,488 crore in the corresponding period of 2014-15. The overall borrowing ceiling for states had been fixed for 2015-16 at Rs 378,903 crore, as against Rs 334,989 crore in 2014-15.