With the latest CPSE Exchange Traded Fund proving a hit and garnering subscriptions of over ₹13,000 crore, the Modi government is on course to raise over ₹30,000 crore from its disinvestment efforts this year. Though still short of the overall target of ₹56,500 crore set for FY17, this is a record mop-up for the disinvestment programme. The CPSE ETF, unlike the stake sales before it, has not had to rely heavily on the munificence of LIC or other state-owned institutions for its subscriptions. The good retail response suggests that this vehicle can be exploited in future too. But while all this is good, the disinvestment proceeds received this year have come mainly from the tried-and-tested routes of minority stake sales and share buybacks in already listed PSUs. The strategic sale route has been a non-starter, and there is little to show against its budgeted mop-up of ₹20,500 crore. While minority stake sales may help the Centre meet its numerical targets on disinvestment, they do not really help achieve the larger reform objectives of the disinvestment programme, which is to reduce the state role in business and free up taxpayer money locked up in inefficient and loss-making PSUs.
Last year’s budget did set specific targets on strategic sales, proposing a new policy to monetise the assets and land banks of loss-making firms. But this initiative has made tardy progress as the Centre has shied away from taking tough decisions on loss-making PSUs. Though quite a few expert committees, including the Fourteenth Finance Commission, have already laid down clear criteria for identifying PSUs that merit a strategic exit, the Government saw it fit to task the NITI Aayog with re-doing this exercise. And even as the NITI Aayog has been sifting through the list of 74 PSUs and shortlisting them for closure or strategic sales, an ill-advised plan for the revival of sick fertiliser units has been initiated. The bailout package announced by the UPA regime for Air India, one of the largest loss-making PSUs, has also been enhanced. Even on some of the smaller units, the Centre seems to be veering back to attempts at reviving them instead of an immediate sale. For instance, Cabinet approval for ‘strategic exits’ from Bharat Pumps and Compressors and Hindustan Cables was secured in September; the former made losses of ₹4,777 crore and the latter has been with the BIFR since 2002. But while further cash infusions have been proposed to prop up the performance of Bharat Pumps and to clear the pending dues of Hindustan Cables, the sale process is yet to be initiated.
Given this backdrop, instead of merely setting out numerical targets for disinvestment, the coming budget should try to focus on the policy objectives of this reform — ridding non-strategic sectors of government presence, true operational autonomy for disinvested PSUs, less government control of state-owned banks and the listing of large state-owned financial institutions so that they can be subject to greater public scrutiny.