LIC IPO key: Divestment numbers missed, Budget dials down target

While Finance Minister Nirmala Sitharaman had set a target of Rs 1.75 lakh crore through disinvestment in the Budget estimates in 2021-22, the target has now been revised to Rs 78,000 crore. And for the year 2022-23, she has set a softer target of Rs 65,000 crore.

People watch the Union Budget at a TV showroom in New Delhi on Tuesday. (Express Photo by Tashi Tobgyal)

5 min readNew DelhiFeb 2, 2022 12:14 PM IST First published on: Feb 2, 2022 at 04:10 AM IST

The government’s ambitious disinvestment agenda, flagged in the Budget announcement last year, has been scaled down.

While Finance Minister Nirmala Sitharaman had set a target of Rs 1.75 lakh crore through disinvestment in the Budget estimates in 2021-22, the target has now been revised to Rs 78,000 crore. And for the year 2022-23, she has set a softer target of Rs 65,000 crore.

Incidentally, Sitharaman did not use the word ‘privatisation’ in her speech this year, the hallmark of her Budget presentation last year — the Opposition has been targeting the government for selling what it says are established companies and businesses to the private sector.

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Although a revised target of Rs 78,000 crore has been set for this financial year, a lot will depend on the proposed public issue of the Life Insurance Corporation, expected to hit the market by March.

In financial year 2020-21, the government had raised Rs 37,896 crore from disinvestment. In the current financial year, it has raised Rs 12,030 crore so far, according to official data.

The highest that the government has raised through disinvestment till date has been Rs 100,045 crore in 2017-18.

Privatisation and asset monetisation were the hallmark of last year’s Budget. While the government has been able to sell Air India and Neelachal Ispat Nigam Limited to the Tata Group and bring out a National Monetisation Pipeline, privatisation of state-owned banks is yet to gain momentum.

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“Towards implementation of the new Public Sector Enterprise policy, the strategic transfer of ownership of Air India has been completed. The strategic partner for NINL (Neelachal Ispat Nigam Limited) has been selected. The public issue of the LIC is expected shortly. Others too are in the process for 2022-23,” Sitharaman said in her Budget speech Tuesday.

In the previous Budget, she had announced that the government would go for privatisation of two public sector banks. But till date, the “Draft Cabinet Note for amendments to relevant Acts are under inter-ministerial consultation,” Budget documents said.

The government said that improvement in the pace of economic recovery would provide new avenues for enhancing disinvestment receipts in the financial year.

The privatisation of two state-owned banks and downstream oil major BPCL is now expected to stretch into next year even as the Centre is racing against time to bring the LIC IPO before the end of this quarter.

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While the enabling framework for privatisation of one of the four general insurance companies —a key Budget announcement — has been done with amendments to the General Insurance Business (Nationalisation) Act being cleared during the monsoon session of Parliament last year, the insurer targeted for the stake sale is yet to be finalised.

Markets participants expect the pending IDBI Bank stake sale also to spill over to next year.

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The Banking Laws (Amendment) Bill, 2021, “regarding privatisation of two Public Sector Banks” was listed for introduction in the winter session of Parliament last year. But it was not taken up by the Cabinet, despite a draft being ready, a government official said. Opposition to privatisation by bank unions, pullback on the farm laws and the upcoming Assembly elections seem to have had a bearing on the timing of the privatisation of banks.

“…we propose to take up the privatization of two Public Sector Banks and one General Insurance company in the year 2021-22. This would require legislative amendments and I propose to introduce the amendments in this Session itself,” Sitharaman had said in her Budget speech last year.

Other companies in line for privatisation include Shipping Corporation of India, BEML, Container Corporation of India and Pawan Hans. The government has received financial bids for Pawan Hans and Neelachal Ispat Nigam Limited, and the privatisation process has moved to the concluding stage.

The government had also put out a four-year National Monetisation Pipeline (NMP) worth an estimated Rs 6 lakh crore. Roads, railways and power sector assets will comprise over 66% of the total estimated value of the assets to be monetised, with the rest in sectors including telecom, mining, aviation, ports, natural gas and petroleum product pipelines, warehouses and stadiums.