New Delhi: The central government can potentially raise nearly Rs 11.5 lakh crore through divesting its stake in all public sector enterprises, banks and insurance firms even while retaining a majority 51 per cent stake in these entities, CareEdge Ratings said on Thursday.
The state-sale potential has been boosted by the recent record rally in the stock markets. Of the Rs 11.5 lakh crore divestment potential, central public sector enterprises could contribute around Rs 5 trillion, while public sector banks and insurance firms could potentially add another Rs 6.5 lakh crore, the ratings agency said.
This represents the maximum amount that could be raised at current market prices without the government losing majority stake. Potential for stake sale at the current market cap is more than twice the total divestment of Rs 5.2 lakh crore conducted since 2014.
In the financial year ended March 2024, the government was able to raise only around Rs 16,500 crore through divestment against the budgetary target of Rs 51,000 crore.
“After missing the divestment target for five consecutive years, taking a fresh look at the divestment strategy is essential,” said Rajani Sinha, Chief Economist, CareEdge.
“The government over the medium term cannot rely solely on small ticket sales of minority shares by offer for sale to meet its divestment target and should take a fresh look at big ticket divestment plans especially if the CPSE has been making losses consistently,” Sinha added.
In the interim budget presented in February, the divestment target for the current financial year was pegged at Rs 50,000 crore. The government is likely to maintain the divestment target at nearly the same level in the full budget to be presented later this month.
After the demerger of land assets of the Shipping Corporation of India (SCI), its possible divestment looks likely in FY25, provided favourable market conditions prevail. If the government offloads its entire stake in SCI, it could generate Rs 12,500-22,500 crore as divestment proceeds.
Other plausible divestments include Pawan Hans and CONCOR. However, they continue to remain on the slow burner. With a bumper dividend from the RBI, the central government’s fiscal position remains comfortable, which may limit the urgency to push ahead with big ticket divestments, CareEdge Ratings noted in a statement.
“In case divestment lags going ahead due to headwinds, the government will continue with its focus on asset monetization,” it added.