Faced with a huge shortfall in disinvestment receipts this fiscal, the Centre is likely to, in the upcoming interim budget, lower its goal on government stake sale mop up for 2024-25, say economists and analysts.

The scaling down of the disinvestment target may be pronounced given that the country is expected to see general elections in the next few months. This may be the approach even as market conditions in 2024-25 are expected to be slightly more supportive for government stake sales.

As against the 2023-24 budget target of ₹51,000 crore, the Centre has so far netted ₹10,051.7 crore from shares sales in public sector enterprises, as per data from the Department for Investment and Public Asset Management (DIPAM) in the Finance Ministry. The current fiscal mop-up is only 20% of the target for the fiscal.

If the Centre were to peg the disinvestment target for 2024-25 at a level below ₹ 51,000 crore, then it would be the lowest since the ₹ 40,000 crore target set for 2013-14, when BJP came back to power at the Centre under Prime Minister Narendra Modi.

Even if the Centre closes the current fiscal with disinvestment receipts of about ₹ 15,000 crore, it will result in a projected shortfall of about ₹ 36,000 crore.

However, the Centre is on a strong wicket as the slow progress on disinvestment is expected to be covered by the better-than- budgeted performance of tax and non-tax revenues.

Aided by higher surplus transfer from the RBI, higher CPSE dividends, and the robust performance of public sector banks (PSBs), the Centre may end the current fiscal with an additional collection of ₹65,000 crore over and above the FY’23-24 budgeted non-tax revenue of ₹ 3 lakh crore, say experts.

“With the upcoming election and the imminent implementation of the Model Code of Conduct (MCC) just months away, there appears to be limited scope for advancement in big-ticket divestment initiatives,” rating agency CareEdge said in a pre-budget survey and expectations. 

It also highlighted that the big-ticket sale of IDBI Bank planned for this fiscal year now appears uncertain, while previous attempts to sell the Centre’s stake in Pawan Hans and BPCL were unsuccessful. The proposed stake sale in the Shipping Corporation of India is currently hindered by the demerger of land assets, CareEdge report added.

The impending general elections may shift the government’s focus away from divestment and privatisation programme, say economy watchers. 

CII Suggestions

 To bring pace to the disinvestment program, the Centre must move to a process in which investor interest is sought for all Public Sector Enterprises (PSEs) to be privatised. 

Those receiving higher interest and expected valuation can be prioritised for disinvestment, CIi has said in its submissions to the government ahead of the Vote on the account. 

“Government should come up with a three-year schedule for the disinvestment of the PSEs”, CII suggested. 

Bank of Baroda Research 

Sonal Bandhan, Economist at Bank of Baroda, said in a pre-budget note that the bank does not expect that the disinvestment target will be met.

“In the coming months, the focus will be on small ticket-size receipts. We thus expect a shortfall of around ₹ 20,000-₹ 30,000 crore this year.

In FY’25, as market conditions are expected to be slightly more supportive, this may in turn enhance government’s ability to attract buyers and allow receipts in the range of ₹ 50,000 -55,000 crore bracket”, she added.

BoB economist also noted that statements by officials suggest that the sale of IDBI Bank is not expected to be completed in the current fiscal year.