Disinvestment Exceeds Target

• 23 Mar 2019

For the second year in a row, the government has exceeded the disinvestment target of Rs 80,000 crore set for the Financial Year 2019, which ends in March.

• Against a goal of ₹80,000 crore in FY19,  divestments have touched ₹85,000 crore with completion of the acquisition of Rural Electrification Corporation (REC) by Power Finance Corporation (PFC) for Rs 14,500 crore.
• Apart from Power Finance Corporation acquiring government’s stake in Rural Electrification Corporation, launch of several tranches of Exchange Traded Fund (ETF) of Central Public Sector Enterprises (CPSE), and PSUs buying back their own shares were among the measures deployed by the government to achieve its target of stake sales.
  • The largest chunk of disinvestment came from several tranches of ETFs launched by the government.
  • The second biggest chunk of Rs 14,500 crore was raised through Power Finance Corporation acquiring government’s 52.63% stake in REC.
  • In the last fiscal year, the government had used the same strategy to meet its disinvestment target as ONGC bought the entire stake of government in HPCL for a total of around Rs 37,000 crore.
• Meeting the disinvestment target for the current fiscal year was crucial because of the uncertainty in revenue collection from direct taxes as well as from the goods and services tax (GST).
• This will enable the government to achieve the revised fiscal deficit target of 3.4% of gross domestic product (GDP).
  • The budgeted fiscal deficit target was 3.3% of gross domestic product (GDP) at the beginning of 2018-19 and was later revised to 3.4% of gross domestic product in the interim budget, mainly because of an expectation of higher payout because of the direct income scheme for farmers.

Disinvestment

• Disinvestment means selling of assets. In the case of Public Sector Undertakings, disinvestment means Government selling/ diluting its stake (share) in PSUs in which it has a majority holding.
• Disinvestment is carried out as a budgetary exercise, under which the government announces yearly targets for disinvestment for selected PSUs.
• Recently, in April 2016, the Department of Disinvestment (under Ministry of Finance) was renamed as Department of Investment and Public Asset Management (DIPAM).
• The mandate of the Department is as follows:
  • All matters relating to the management of Central Government investments in equity including disinvestment of equity in Central Public Sector Undertakings.
  • All matters relating to the sale of Central Government equity through offer for sale or private placement or any other mode in the erstwhile Central Public Sector Undertakings.