Stake sell-off, public float key agenda for revenue stream in Budget

Unlike previous years, the finance ministry plans to raise the entire amount, depending heavily on strategic sales of sick PSUs as well as routine disinvestment issues through public offers. A formal announcement on the NDA’s disinvestment strategy is expected in the Union Budget next month.

In addition, the finance ministry is also considering a proposal to expand public float of PSUs to 25 per cent. “We are also working on Sebi’s proposal to increase public float of PSU. If it goes through, that too can yield rich proceeds,” said a senior government official.

Market regulator Sebi has urged the government to ensure that all state-owned units meet minimum public listing norms of 25 per cent, in line with that of private companies. At present, PSUs are mandated to have a minimum public float of 10 per cent.

For FY15, the department of disinvestment has already identified PSUs for stake sales including Coal India Ltd, Hindustan Aeronautics Ltd, SAIL as well as power sector PSUs.

“Non-tax revenue such as those from disinvestment is essential to not only help bridge the fiscal deficit as well as to increase capital expenditure,” said the official, adding that the department of public enterprises has also been asked to review sick PSUs where government stake can be sold off.

Analysts, too, have pointed out that the government may have to be more aggressive in its divestment policy if it wants to increase spending. “The government can yet take an aggressive stance towards cutting subsidies but simultaneously increase spending on capex. … Disinvestment of PSUs will be material in terms of amount raised only if it implies privatisation — which looks unlikely given the Gujarat experience. Regular proceeds from stake sales will not swing the numbers, and will anyway be budgeted in,” said UBS in a recent research note, estimating a fiscal deficit of 4.1 per cent of the GDP in FY15.

The Interim Budget had partially reduced the disinvestment target to Rs 36,925 crore from the more ambitious Rs 40,000 crore that was estimated but never realised in previous years.

In FY14, the target for proceeds from stake sales was more than halved to Rs 16,027 crore.

Finance minister Arun Jaitley has also given the go ahead for residual stake sale of 29.54 per cent in Hindustan Zinc Ltd.