Divest and spend

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The government’s yet another attempt to divest its stake in the beleaguered Air India appears to be gaining traction. As reported in this paper, the Centre has received multiple “expressions of interest” for the debt-laden airline. The process will now move to the second stage with the qualified bidders expected to be notified by next month. Interest from prospective buyers has been greater this time around with the government modifying its earlier terms of sale, hoping to make it an attractive proposition after previous efforts to sell its stake in the airline failed to find buyers. Separately, reports also reveal that an evaluation committee is meeting to consider the expressions of interest received for the government’s stake in Bharat Petroleum Corporation Limited. While there is ambiguity over whether either of these transactions will close by the end of the current financial year — only three months remain — disinvestment of either of these entities could help plug, to some extent, the revenue shortfall that the Centre is facing this year. So far this year, proceeds from disinvestment have been paltry — as against a budgeted target of Rs 2.1 lakh crore, the government has so far managed to garner only a mere Rs 6,533 crore.

The government’s past record of meeting its disinvestment target is nothing to write home about. In fact, revenue from disinvestment (as a percentage of GDP) has been almost stagnant in the past few years. In the last financial year, too, even as the budgeted target of Rs 1.05 lakh crore was revised downwards to Rs 65,000 crore at the revised estimates stage, actual collections stood even lower at Rs 50,304 crore as per data from the Controller General of Accounts. Part of the problem is the manner in which successive governments have approached the issue of disinvestment/privatisation. Disinvestment is often viewed as a means of plugging the gaps in the revenue, often to be carried out towards the end of the year, when the budgeted revenue shortfall becomes glaring. For instance, despite announcing it in the budget, not much progress has been made on the LIC IPO.

The government must lay out a roadmap for disinvestment/privatisation of PSUs, listing out in detail the entities where it intends to cut its stake, and the timelines it intends to follow. The burden on the exchequer for continuing to finance loss-making public sector entities in sectors where competition exists and no public purpose is served is unreasonably excessive. And coming at a time when the government is facing a huge hole in its revenues, garnering extra resources though this route could provide it with some fiscal space. Proceeds from such stake sales could be ring fenced, only to be used to finance fresh public investment.

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