Disinvestment target maybe missed for 6th straight year
With equity markets down by about 13% since the start of the fiscal year 2015-16, the government is likely to miss the disinvestment target for FY 2015-16. The government set a record disinvestment target of Rs.69,500 crore for FY 2015-16 during the budget. However, with an actual disinvestment of Rs.13,340 crore, the target is likely to be missed for the 6th straight year.
Disinvestment refers to the sale of government's stake or assets in subsidiaries or companies including public sector undertakings to generate revenues. The government often uses disinvestment to meet its budgetary expenditure to keep fiscal deficit within targets. It was started in FY1991-92 by the then finance minister Manmohan Singh as a part of the economic reforms to liberalise, privatise and globalise Indian economy.
Over the last 25 years since FY1991-92, the government has been able to meet its disinvestment target only 16 times.
Critics often term disinvestment as the selling of 'family silver' by the government to meet its expenditure, and hence oppose it. Trade unions look at disinvestment as privatisation of the PSUs and hence often protest against it, affecting the functioning of PSUs and consequently its share values. The market volatility also plays a significant role in disinvestment decisions as had happened in FY2015-16.
The government may miss its ambitious disinvestment target for FY2015-16 of Rs.69,500 crore by more than Rs.50,000 crore. As of Dec'15, the government had garnered only Rs.12,700 crore by the sale of four PSUs- Indian Oil, Rural Electrification Corporation, Dredging Corporation, and Power Finance Corporation. However, the shortfall in revenue from disinvestment had been managed by increasing the excise duty on petrol and diesel.
The government had been planning an alternate strategy for disinvestment in volatile markets. According to the Finance Minister Arun Jaitley, the plan would be rolled out in the next 2-4 weeks. For the later half of the financial year 2015-16, the markets had been extremely volatile adversely affecting the sale of PSU stocks. Volatile market conditions negatively affected the pricing of PSU stocks.
According to the Associated Chambers of Commerce and Industry of India, the government may significantly lower the disinvestment target for FY2016-17 as markets are expected to stay soft. The Rs.50,000 crore of expected shortfall for FY16 is also another reason.
