India’s public sector disinvestment programme, which was rebooted with much fanfare in the 2020 Budget, is showing signs of meeting the same fate as earlier years with receipts falling substantially short of ambitiously set targets. Data from DIPAM show that offers for sale, buybacks and a solitary IPO have managed to mop up just ₹15,220 crore for the first nine months of this fiscal. Even with the last hour scramble by the Centre to push through the Indian Railway Finance Corporation’s (IRFC) IPO, a few offers for sale and nudge more PSUs into buybacks, the March-end target of ₹2.1 lakh crore looks way out of reach.

To be fair, the NDA regime has demonstrated more tangible results than its predecessor UPA in raising material sums from PSU disinvestment. It managed to raise over ₹50,000 crore in three of the last five years (FY15 to FY20) by tapping the exchange traded fund route and managing well-timed offers for sale. But with such efforts already fetching over ₹3 lakh crore in the last five years, the low hanging fruit of minority stake sales now appears to have been plucked. If the Government is now serious about setting its sights higher in the upcoming Budget, the disinvestment programme may need a makeover. Going by the recent experience, it may do well to revisit two aspects. One, if it is keen on getting more private bidders interested in strategic sales of large PSUs, it may need to do more detailed groundwork. Refurbished strategic sale documents for Air India and BPCL put out recently suggest that the government has learnt some lessons from previous mis-steps; it is now willing to rid PSUs of excessive debt or contentious liabilities, to sweeten such deals. But one-sided terms that require successful bidders to take on onerous commitments (such as retaining all employees or not selling any assets) have proved to be a wet blanket. The Centre may also need to proactively reach out to potential buyers in these sectors to widen the field. Two, it also needs to shed its diffidence, evident from the under-pricing of attractive PSUs. When private sector promoters have been pricing middling businesses at astronomical IPO valuations, offers from the fundamentally solid IRCTC and IRFC have left far too much money on the table. Choosing lead managers for their ability to maximise disinvestment proceeds, rather than ability to bid rock-bottom fees may help.

For the Centre to extract more bang for buck from disinvestment, it also needs to introspect why sound listed PSUs today command a fraction of the valuation of their private sector peers. Ad-hoc interventions from their promoter on untimely buybacks, dividend payouts and forced takeovers have gone a long way in convincing investors that PSUs enjoy operational autonomy only on paper. Undoing this perception is critical to ensuring that the disinvestment programme takes off at least from here on.