On Wednesday, the Cabinet Committee on Economic Affairs (CCEA) approved the strategic disinvestment of five public sector enterprises, namely, Bharat Petroleum Corporation Ltd (BPCL), Container Corporation of India Ltd, Shipping Corporation of India, Tehri Hydro Power Development Corporation (THDC) and the North Eastern Electric Power Corporation (NEEPCO). The proceeds from these stake sales will help the Centre move closer to achieving its disinvestment target of Rs 1.05 lakh crore for this year. So far this year, the government has been able to garner only Rs 17,364 crore or 16.5 per cent of its budgeted disinvestment target as per data from the Department of Investment and Public Asset Management. Coming at a time when the Centre is facing huge shortfalls in both direct and indirect tax revenues, and its gross tax revenues have grown by a mere 1.5 per cent in the first half (April to September) of the current financial year, the determined push to meet its disinvestment target is welcome.
Of the five companies, the stake sale in BPCL is likely to be the biggest draw. The sale will be of interest not only to domestic firms, but also to major international players as well. According to some estimates, the government could fetch around Rs 63,000 crore from its stake sale in the company, more than half of its total disinvestment target for the year. Add to that proceeds from the stake sale in the Container Corporation and the Shipping Corporation, and the Centre may well end up earning more than Rs 70,000 crore through these three firms alone. But, with only four months to go, it is not clear whether these stake sales can be wrapped up by the end of the financial year. It should also not be another case of public sector firms stepping in to buy these entities in order to bail out the government. As it is, the sale of THDCIL and NEEPCO, the other two entities, to NTPC, is essentially a transfer of assets between various arms of the public sector.
The government would benefit from drawing up a more ambitious, better laid out, medium-term plan for disinvestment, rather than approaching it as merely an arrangement for plugging its revenue gaps. It should draw up a list of potential candidates and release an advance calendar, indicating the period of disinvestment. This would help draw in more buyers. Further, the proceeds from disinvestment should be used only for the creation of new assets, not to meet its revenue expenditure.