With half the fiscal year nearly complete, it is not surprising that the government is beginning to fret over the slow progress of the disinvestment programme. Of the budgeted ₹69,500 crore from PSU stake sales, only ₹12,700 crore has been raised so far . Reports that the Centre wants the EPFO to park part of the money that it has been allowed to invest in equity market in the CPSE ETF, highlights this desperation. Almost half the stocks in this ETF are companies that have been hard hit by the crash in commodity prices. This is not an asset the EPFO should be investing in now. The Centre, staring at yet another failure to meet its divestment target, appears ready to use any means to inch towards the target set for this year.

The urgency stems from the tight fiscal condition that the country is currently in. The fiscal deficit for the April to June period has already covered 69.3 per cent of the current year’s target. This is despite a 36 per cent increase in indirect tax collection in the first five months of the current fiscal, thanks to the steep hike in excise duty on petrol and diesel, and the higher rate of service tax. A slowdown in income tax collection, along with a wide shortfall in the money raised through selling stakes in public sector companies, can make it a challenge for the Centre to meet this fiscal year’s targeted deficit of 3.9 per cent of GDP. The increase in pension payouts for defence personnel is expected to add pressure on this goal. Inability to raise sufficient revenue can result in the government cutting back on investments, pegging back growth.

But the Centre has only itself to blame for this predicament. That the divestment department has gone about its task in a very lackadaisical manner in recent times is borne out by the fact that the gap between proceeds from stake sales and the budgeted target has been between 20 and 65 per cent since 2011-12. Given the decision to almost double its target for this fiscal, the Centre could have shown more alacrity in front-loading the sales this fiscal year, when the equity market was buoyant. The success of the REC’s offer for sale in April highlights investor willingness to subscribe when the outlook for stocks is rosy. The divestment department needs to employ professionals to advise it on the timing of the sales better. Anyone who was tuned in to the stock market would have known that the second half of the year was expected to be rocky for stocks, given the impending monetary policy normalisation by the Fed. The offer for sale mechanism being employed for these stake sales also needs a rethink. With a retail discount of 5 per cent and the almost immediate availability of allotted shares, many investors have taken to short-term speculation through these offers.