Finance Minister Arun Jaitley on Friday said the government has surpassed its Rs 80,000 crore disinvestment target for the current financial year as proceeds from stake sales have touched Rs 85,000 crore. Launch of several tranches of Exchange Traded Fund (ETF) of state-owned companies, Power Finance Corporation acquiring government’s stake in Rural Electrification Corporation 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 — resulting in total collections of Rs 45,730 crore through this mode alone. The Centre launched Bharat-22 ETF and CPSE ETF comprising of stake sale in a basket of 22 and 11 government companies, respectively. Subscribers to ETFs are given units which are listed on the stock exchanges for trading. “As against a target of Rs 80,000 crore for disinvestment for the current year, the divestment receipts have touched Rs 85,000 crore today,” Jaitley said in a tweet.
ETF tranches, stake sales & cross sale help beat target
A mix of options used by the government helped it surpass the Rs 80,000 crore Budget Estimate for disinvestment for the current fiscal year. Launch of several tranches of Exchange Traded Fund (ETF) of state-owned companies, cross sale of government equity in same sector companies, sale of stake in Axis Bank and Coal India accounted for the largest chunk of collections. While the government surpassed its target by Rs 5,000 crore, it slipped on meeting announcement on strategic stake sale and listing of state-owned companies through initial public offer (IPO).
The second biggest chunk of Rs 14,500 crore was raised through Power Finance Corporation acquiring government’s 52.63 per cent stake in REC. PFC is understood to have funded the deal through a mix of internal resources and market borrowings. 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. Cross sale of government equity in companies in the same sector has been critical in filling any likely slippage from the disinvestment target.
While the Budget Estimate has been surpassed, not much progress was made on strategic sales and planned privatization of Air India during the year. “The government has approved listing of 14 CPSEs, including two insurance companies, on the stock exchanges. The Government has also initiated the process of strategic disinvestment in 24 CPSEs. This includes strategic privatization of Air India,” Jaitley said in his Budget speech for 2018-19.
During the year, the government could list five companies on the exchanges — MSTC Ltd, RITES, Ircon International, Garden Reach Shipbuilders & Engineers Ltd and MIDHANI — through initial public offers, raising a total of about Rs 2,000 crore. The government also had to infuse additional funds in state-owned banks as they fell short of plans to raise funds from the markets through sale of shares.
Last December, the government announced additional fund infusion of Rs 41,000 crore in public sector banks, to partly compensate for shortfall in raising funds from the markets. As against additional planned capital infusion of Rs 65,000 crore in the current financial year, public sector bank will get a total of Rs 1.06 lakh crore. This effectively resulted in government stake rising significantly in the public sector banks.
Among the other large stake sales, the government raised a total of Rs 5,218 crore through the offer for sale of 3 per cent of its equity in Coal India.
The government also raised about Rs 5,300 crore through sale of 3 per cent of stake in Axis Bank which was held via SUUTI (Specified Undertaking of Unit Trust of India). Collections from disinvestment is expected to help the Centre in meeting its revised fiscal deficit target of 3.4 per of Gross Domestic Product.