Government accelerates disinvestment, asset monetisation, achieving 31% of target in Q1

The government has pushed the pedal on its disinvestment and asset monetisation plan in the current fiscal, raising about 31 per cent of its full-year budgeted target in the first quarter itself.

Recording the fastest pace of disinvestment ever in the first quarter of any fiscal, the period between mid-May and June this year saw one offer for sale from the government every week for disinvestment of public sector enterprises.

Faced with the stress of increased expenditure on subsidy due to a higher import bill, the government is making all-round efforts to garner revenues, especially from the non-tax side.

Over the past six weeks, offer for sale (OFS) of six public sector enterprises hit the capital markets wherein the government garnered a cumulative Rs 18,561 crore. The six entities are Central Bank of India, Coal India, NHPC, NLC India, GIC and IRFC.

Separately, Rs 6,367 crore has come from asset monetisation under the Infrastructure Investment Trust (InvIT).

As against the full year target of Rs 80,000 crore envisaged in the FY27 Budget, the government has so far raised Rs 24,928 crore from disinvestment and asset monetisation.

It has already firmed up a pipeline of public sector companies to be divested in the current fiscal and hopes to exceed the Rs 80,000 crore budgeted disinvestment target.

The big ticket disinvestment in the current fiscal could be of Life Insurance Corporation (LIC). The government currently holds 96.5 per cent in the insurance behemoth and has to lower it to 90 per cent by May next year. The government had in May 2022, raised Rs 20,500 crore by selling a 3.5 per cent stake in LIC.

The strategic sale in IDBI Bank is also on the table. Despite a failed attempt earlier this year to sell its stake in the bank, the government is working to fast-track the sale process and invite fresh bids.

The government's move to boost miscellaneous capital receipts or disinvestment and asset monetisation in the current fiscal comes in the backdrop of a likelihood of the expenditure exceeding the budget estimates in the wake of higher energy and fertiliser import prices due to the West Asia crisis.

As per government accounts, the fiscal deficit, which is the gap between income and expenditure, stood at over Rs 1.62 lakh crore or 9.6 per cent of FY27 Budget target in the first two months of the fiscal.

While the net tax revenues were at 12.1 per cent of the full year budget target till May, miscellaneous capital receipts were 17 per cent of the budgeted target.

Revenue and capital expenditure, on the other hand, was at 15.3 per cent and 20.5 per cent of the full year budget target at the end of May.

Garnering budgeted revenues would be key to address the stress related to likely doubling of fertiliser subsidy bill to about Rs 3 lakh crore and crude oil imports amid the West Asia crisis, and the impact of the El Nino on the monsoon. The government has set a 4.3 per cent fiscal deficit target for FY27.

Fixing separate disinvestment targets has been discontinued since the Revised Estimate (RE) of FY2023-24. However, Rs 30,000 crore, Rs 33,000 crore, Rs 33,837 crore and Rs 80,000 crore were kept under Miscellaneous Capital Receipts for RE 2023-24, RE 2024-25, RE 2025-26 and BE 2026-27 respectively, which include estimated receipts on account of management of equity investments and public assets through various mechanisms.

In 2021-22 and 2022-23, as against the RE of Rs 78,000 crore and Rs 50,000 crore set in the Budget, the government had actually raised Rs 13,534 crore and Rs 35,294 crore, respectively.

In 2019-20 and 2020-21 as against the RE of Rs 65,000 crore and Rs 32,000 crore, the actual realisation stood at Rs 50,300 crore and Rs 32,886 crore, respectively.