Budget 2022: Govt to miss divestment target even after Air India sale

The government set a divestment target of Rs 1.75 lakh cr in FY22, much higher than the mere Rs 12,029.90 cr it has raised so far

The complete handover of Air India to Tata Group days before the Budget is a shot in the arm of the government’s divestment plan, which is otherwise lagging the ambitious targets set by Finance Minister Nirmala Sitharaman in 2021.

The government aimed to sell stakes worth Rs 1.75 lakh crore in FY22 from central public sector undertakings (PSUs), which seems out of reach from the mere Rs 12,029.90 crore (less than 10 per cent of the target) it has managed to raise so far, including the Air India sale.

The Tata Group has taken off the government’s hands Air India’s debt worth over Rs 15,300 crore and paid Rs 2,700 crore. The Centre is looking to finalise the initial public offering of state insurer Life Insurance Corporation (LIC) in this fiscal year to brighten its divestment picture, but it is unlikely to help.

A government official told Reuters that the divestment department was solely focused on the IPO from which it hopes to gain as much as Rs 89,943 crore and had put aside other privatisation plans for this fiscal year.

Also read: India seeks regulatory fast track for LIC as it gears up for the country's biggest IPO

Tuhin Kanta Pandey, secretary of the department of investment and public asset management (Dipam), told Livemint that the target is unlikely to be achieved even as LIC IPO seems to be on track to be completed by March. “It would have required BPCL transaction to close, but I don’t think BPCL can close by March; so, therefore we have to go with a lesser number. Let’s see how much we get from LIC, which is a large transaction and what others we can conclude,” he is quoted as saying.

As with most businesses, the Covid-19 pandemic has played a major role in the delay of divestment deals, with the third wave and new variant Omicron being the latest hurdle.

Experts quoted by a report believe that uncertainty in global markets over Covid-19 among other fears has adversely affected divestment plans over the past two years.

Companies the government is trying to exit include Shipping Corporation of India, BEML, Neelachal Ispat Nigam Ltd, Container Corporation of India and Pawan Hans. The privatisation of Pawan Hans and Neelachal Ispat Nigam is in its last stage. The Centre was pushing for the IDBI Bank stake sale this year but regulatory approvals may push it to next fiscal.

FM Sitharaman’s Budget 2021 stressed privatisation and asset monetisation unveiling a comprehensive National Monetisation Pipeline worth over Rs 6 lakh crore, aiming to exit sectors where competitive markets are better managed by strategic investors.

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