For the second time in a row, the Union Budget skipped the word ‘disinvestment’. With this, there is a reiteration of the Government’s focus on enhancing the value of Central Public Sector Enterprises (CPSEs) rather than selling part of equity holding.
“Our focus is on value creation,” Tuhin Kanta Pandey, Secretary of the Department of Investment and Public Asset Management (DIPAM) at the press conference by Finance Minister Nirmala Sitharaman and Secretaries, following the Union Budget presentation on Tuesday. The Budget has mentioned ₹50,000 crore under ‘Miscellaneous Capital Receipts’. “This combines with all kinds of receipts, disinvestment receipts, asset monetisation receipts and other kinds,” he said.
Quick recap
In Budget documents over the years, the word ‘disinvestment’ was used for the first time in the full Budget of 1991-92 and the target was ₹2,500 crore which rose to an all-time high of ₹2.10 lakh crore (comprising sales of Government stakes in CPSEs, public sector banks and financial institutions). Maximum realisation through disinvestment has been little over ₹1 lakh crore in 2017-18.
Earlier, the word ‘disinvestment’ used to be specifically mentioned under the head ‘Miscellaneous Capital Receipts.’ The aggregate capital receipts from disinvestment or strategic divestment have constituted about 2 per cent of the Central Government’s non-debt revenue and capital receipts during the last 25 years. For example, the disinvestment receipts during this period have a little over ₹5 lakh crore, i.e., about ₹20,000 crore per year.
The Interim Budget for FY25 had a regular head (under capital receipt) titled ‘Miscellaneous Capital Receipts’ but did not mention ‘disinvestment’. Also, the explanation reads, “These include receipts on account of management of equity investments and public assets through various mechanisms.” Now, same has been mentioned in the full Budget.
“In the interim budget, FM had announced that we are going for a holistic strategy for management of equity of PSUs, which includes value creation, using the performance, capex, dividends, and consistent policy and the capital management, along with calibrated disinvestment strategy, which also includes listing and market dilution, in a holistic way. So that same value maximisation strategy will continue,” Pandey said.
The way ahead?
Now the big question is what will happen to the strategic disinvestment of CPSE, for which process is underway? “These are Cabinet decisions and will be respected. However, the Government will decide about the time,” Sitharaman replied indicating that there would not be impact on privatisation of DBI Bank or Shipping Corporation of India.
Also, there is the question of the fate of the PSE policy for which there is no clear-cut answer now. The PSE policy announced first as part of Atmanirbhar Bharat in 2020, aims to minimise the presence of CPSEs including financial institutions, and to create new investment space for the private sector. Under this, various sectors have been classified either as strategic or non-strategic. The strategic sectors include atomic energy, space and defence, transport and telecommunications, power, petroleum, coal, and other minerals, banking, insurance, and financial services. In strategic sectors, there will be a bare minimum presence of public sector enterprises. The remaining CPSEs in the strategic sector will be privatised or merged with subsidiaries of other CPSEs or closed. In non-strategic sectors, the CPSEs will be privatised or closed.