Disinvestment and the thin red line

Only four times, the disinvestment target has been met. The last of these was 2003-04, when the Arun Shourie-led disinvestment ministry under the election-bound NDA government rushed to sell ONGC shares in the largest public offer then

Every year in February, when the finance minister declares the budgeted receipts under the head 'disinvestment', analysts go into a frenzy, crunching numbers and, at times, over-analysing the feasibility of achieving the number, possible candidates, union pressure, market conditions, investment banker fees and so on.

This being an election year, one is likely to miss that excitement. However, the alleged concerns over the government missing the so-called 'disinvestment target' and thereby breaching the fiscal deficit target of 4.8 per cent, which the minister himself has described as the unbreachable 'red line', are making up for the loss.

The finance minister, when quizzed in Davos, did not appear worried, indicating that the money would come, if not under this head, then under the head of "other non-tax revenue". He was more emphatic on not breaching the 'red line' than on achieving the disinvestment target.

Historically, the disinvestment target is something ministers have been happy to miss. Successive ministers have used this head as some kind of suspense account, overpromising at Budget time, often to shut up fiscal deficit-obsessed commentators, and then giving themselves a good boy image in front of that other important constituency of public sector employees towards the end of the year saying, "See, I did not sell too much of the family silver."

Let us dig into history. The divest.nic.in website has data for 23 post-reforms financial years beginning 1991-92. Of these, there were targets for 18 years (for five years under UPA-I, there was no target because the Left parties which were part of the government were against it).

Only four times, these targets were met. The last of these was 2003-04, when the Arun Shourie-led disinvestment ministry under the election-bound NDA government rushed to sell shares of ONGC in the largest public offer then. The government managed to overshoot the target of Rs 14,500 crore. But the hurried sale turned into an allotment nightmare for investors, and took years to clean up.

Of the other three, the 94-95 sale proceeds numbers, Rs 4,843 crore against the target of Rs 4000 crore, included proceeds for auctions done in the previous financial year. If one adds the 93-94 target of Rs 3,500 crore, the government had fallen short of the combined target of Rs 7,500 crore by a long way.

In 98-99, the target of Rs 5,000 crore was met largely by the cross-purchase of shares by GAIL, ONGC and IOC, technically not disinvestment.

That leaves us with 91-92, the dream year, as the only year when the government successfully achieved its disinvestment target by actually selling to minority investors without many goof-ups. The website says the government got Rs 3,037 crore against the budgeted Rs 2,500 crore by the auction method.

To sum it up, if the government had achieved its targets every one of those years, it would have sold Rs 2.31 lakh crore worth of PSU shares. Instead, it sold only Rs 1.37 lakh crore or 59 per cent. This year's target (excluding minority the stake sale in Hindustan Zinc and Balco) was Rs 40,000 crore. About Rs 5,000 crore has come in so far. Can Rs 18,600 crore come in the next 60 days? Then we can call it an 'above average' year. There is no thin red line here.