The series of disappointments suffered by the Centre in selling strategic stakes in public sector enterprises in recent times once again highlights the need for a complete overhaul of the disinvestment programme. Take these instances: Sale of 52.8 per cent stake in Bharat Petroleum had to be called-off recently because almost all the bidders had withdrawn, citing uncertainties in global energy market. Strategic sale of Central Electronics was shelved due to lapses in the bidding process. Sale of stake in Pawan Hans also could not take off. While DIPAM has been trying to sell strategic stakes in many other public sector undertakings, including Rashtriya Ispat Nigam, IDBI, BEML and Shipping Corporation of India, it has been hard put to close these sales. The sale of Air India is a story by itself. Disinvestment of smaller stakes in PSUs has also met with limited success. Over the last three decades, the Centre has managed to meet its disinvestment target in just six years. With weak stock market conditions roiling the disinvestment programme in many years, the Centre resorted to divesting stakes through PSU exchange traded funds and cross selling to other PSU entities to meet its annual target.

While market related uncertainty could be a factor deterring prospective investors in PSUs, they could also be wary about regulatory uncertainty, aggressive employee unions in the PSUs and government interference in management . The important question is what drives the disinvestment programme?. Ideally, disinvestment should be driven by the long-term vision of the government on the extent to which it wants to privatise the economy and the sectors where it needs to retain a presence — and not by the need to raise revenues. The strategic disinvestment policy of 2021 laid down that the Centre will maintain ‘bare minimum’ presence in strategic sectors. While exiting non-strategic sectors is a good idea, it needs to rethink the extent of its presence in certain strategic sectors such as power, coal, energy and defence. Given that the Centre needs to keep adjusting its regulatory policies in these sectors, it is quite difficult for a private sector company to operate here. A case in point is that of the private oil companies now struggling with the petroleum products pricing regime.

The Centre also needs to stop relying on disinvestment proceeds to bridge the gap in its Budget. The sums earmarked for these receipts had been increased sharply in recent years, amounting to over 10 per cent of the fiscal deficit. It may be a good idea to not set any budget targets for disinvestment. If any sum is realised due to the sale of strategic or partial stake in any year, it can be accounted for in the actual budget numbers. This way, there would be no urgency to sell stakes in profitable PSUs at cheap valuations, or to devise innovative methods to show higher proceeds. Not budgeting for such receipts would also mean that the Centre need not fret about the fiscal deficit if the disinvestment target is not met. The Centre could, instead, focus on improving the management of these enterprises to increase their profitability.