The government has set itself a target of ₹1,05,000 crore for disinvestment proceeds for financial year 2019-20. Finance Minister Nirmala Sitharaman has termed this a “fairly realistic” target despite it being ₹20,000 crore more than what was achieved in the previous year.
Notably, this year, Ms. Sitharaman said the government was considering reducing its direct majority shareholding in some companies to below the 51% mark.
“The government is setting an enhanced target of ₹1,05,000 crore of disinvestment receipts for the financial year 2019-20,” Ms. Sitharaman said in her Budget speech. “The government will undertake strategic sale of PSUs. The government will also continue to do consolidation of PSUs in the non-financial space as well.”
‘Realistic goal’
“We have set ourselves a fairly realistic goal for disinvestment,” she said at a press conference. “With disinvestment, there is also a reform agenda that gets fulfilled. If it is important to push these reforms, because we don’t want the economy to stagnate, disinvestment is important.”
The Budget document said, “The government is considering, in case where the undertaking is still to be retained in government control, to go below 51% to an appropriate level on a case- to-case basis.” It has also decided that the 51% of government control will be calculated after including the stake owned by government-controlled institutions.
For example, if this proposal is passed without modification, the government can reduce its shareholding in a PSU to, say, 40% from 51%, with the remaining 11% being owned by the LIC or any other government-controlled institution.
Helping small investors
The reasoning behind this move, the Minister said, was to open up the market for small retail investors.
“We did announce about the 51% shareholding, but if there are two or three agencies of the government holding it and together it comes to more than 51%, we thought it should be opened up,” she said. “The government still retains its ownership, but if you open it up, you are at least giving opportunity for, let’s say, India’s small retail purchasers of stock. You need to open up this ownership to the wider Indian market.”
Disinvestment Secretary Atanu Chakraborty said the government would consider selling stake in profit-making companies if the situation demands.