Accomplishing the disinvestment aim for the second consecutive year, the government has surpassed its target of Rs 80,000 crore for the Financial Year 2019 before the end of March. The acquisition of Rural Electrification Corporation (REC) by Power Finance Corporation (PFC), which amounted to Rs 14,500 crore, took disinvestments past the target to a staggering ₹85,000 crore in FY19.
Achieving the Disinvestment Target
The government had employed several strategies to reach the disinvestment goal, which included launching various tranches of Exchange Traded Fund (ETF) of Central Public Sector Enterprises (CPSE), Public Sector Undertakings (PSUs) buying back their own shares and significant transactions such as the Power Finance Corporation’s acquisition of the government’s stake in Rural Electrification Corporation. The highest share of disinvestment proceeds was from a consistent series of ETFs being introduced by the government. Power Finance Corporation’s purchase of the government’s 52.63% stake in REC, amounting to Rs 14,500 crore, was the second largest contributor to the total disinvestment receipts.
Diinvestment Strategy in Previous Fiscal Year
A similar strategy was applied in the previous fiscal year to meet the disinvestment target, that resulted in ONGC acquiring the full government stake in HPCL for around Rs 37,000 crore. The accomplishment of the disinvestment target for the current fiscal year is critical given the uncertainty about revenue collection from direct taxes and goods and services tax (GST).
Fiscal Deficit Target Attainment
This achievement will enable the government to reach its revised fiscal deficit target of 3.4% of gross domestic product (GDP). At the inception of 2018-19, the budgeted fiscal deficit target was 3.3% of GDP but was later modified to 3.4% in the interim budget, mainly due to the anticipation of a larger payout owing to the direct income scheme for farmers.
Table: Facts About Disinvestment
| Year | Disinvestment Target (in Rs Crore) | Disinvestment Achieved (in Rs Crore) |
|---|---|---|
| FY18 | 80,000 | 85,000 |
| FY19 | 80,000 | 85,000 |
Understanding Disinvestment
Disinvestment refers to the sale of assets. In the context of Public Sector Undertakings, this involves the government selling or diluting its ownership (share) in PSUs where it holds a majority stake. The government announces annual targets for disinvestment as a part of its budgetary exercise for selected PSUs.
In April 2016, the Department of Disinvestment, under the Ministry of Finance, was rebranded to the Department of Investment and Public Asset Management (DIPAM). Its mandate includes handling all aspects related to Central Government’s equity investments and their management, including the disinvestment of equity in Central Public Sector Undertakings, and the sale of Central Government’s equity through various modes in the erstwhile Central Public Sector Undertakings.
