Street Food: The Rs 55,000-crore Budget idea

As in every Budget before this, the government is way short of achieving its budgeted disinvestment receipts. As in most of those years, it is not even near the halfway mark. This financial year’s target of Rs 56,500 crore, sharply lower than the Rs 69,500 crore targeted the previous year, had two parts. The first was minority stake sales of Rs 36,000; the second was strategic sale of equity, for Rs 20,500 crore. Share sales so far have garnered Rs 23,500 crore.
 
The only solace this time is that the Budget has come a month in advance. Therefore, there is a longer window to catch up with the target, if the government intends to. A happy Budget could add to the 1,200-points Sensex rally and help raise a few billions. If one analyses the two-part target, the department of investment and public asset management has done reasonably, with Rs 21,500 crore proceeds in minority stake sales. It is strategic sales that bit the dust.
 
On this second part, multiple ideas have been floating around. While there is a big chunk of value waiting to be unlocked in companies like Bharat Aluminium and Hindustan Zinc, this has been going in circles for several years. Another idea was to sell off unviable or defunct companies. But, who is going to pay for these? Some of them were into producing yesteryear items such as wristwatches, photo films and bicycles.
 
Even if somebody is eyeing the prime land these companies are sitting on, they would want it free from labour disputes and future legal complications. It took 14 years for the government and the Tatas to sort the issues over the land in the VSNL sale. Hemisphere Properties, the entity which now owns 773 acres of the erstwhile VSNL, and in which the government has 51 per cent stake, is another candidate where value could be unlocked. At 2009 prices, the land was worth Rs 6,200 crore; it would now be more. The other idea, which yielded a small portion, was sale of stake held by Special Undertaking of Unit Trust of India (Suuti). After much criticism about this vehicle, holding assets of significant value but continuing to operate without proper governance structures, the government called for merchant bankers to sell stakes in 51 companies where Suuti owned shares.
 
The bulk of the value, though, resides in chunks of stake held in Larsen & Toubro, ITC and Axis Bank. By the time hiccups in the sale process relating to merchant bankers’ conflict of interest was cleared, the stakes were worth at least Rs 65,000 crore. Yet, the government has realised only about Rs 2,000 crore, selling a small portion of L&T stake.
 
While L&T and ITC shares have gained, Axis Bank has seen a significant value erosion since September. Despite this, as this piece is being written, the value of the Suuti stake is Rs 55,371 crore. That is likely to be more than the amount of surplus the government managed to generate through the entire demonetisation drama. It could be enough money to bankroll a new farm loan waiver scheme, which some quarters are pushing as the only way for the ruling party to score in the UP elections.
 
With impending top-level changes this year in two of those companies, this is an opportune moment for this big decision. If not in the next two months, this low-hanging fruit should be plucked and consumed by the end of FY18. It is not a Rs 55,000 crore idea; it is a Rs 55,000 crore no-brainer.