Centre set to miss FY22 divestment target despite Air India sale

With the Tata Group taking over ₹15,300 crore worth of Air India debt and paying ₹2,700 crore in cash, the Centre’s privatisation agenda has received a substantial booster shot. The development is significant given that the Union government’s disinvestment plans have been lagging Budget targets by a wide margin — so far less than 10 per cent of the ₹1.75 lakh-crore FY22 disinvestment target has been met.

Analysts point out that this will be the third consecutive year when the government is falling short of the budgeted disinvestment numbers. Among other reasons, the upcoming Assembly elections in five states — Uttar Pradesh, Goa, Manipur, Punjab and Uttarakhand — are believed to have held back the government from pushing ahead with divestment plans. Disinvestments never go down well with the masses.

The Centre is hoping to launch the initial public offering (IPO) of Life Insurance Corporation (LIC) before March, while the privatisation of Neelachal Ispat Nigam is expected to be completed shortly. Including the funds received from the Air India sell-off, the government has so far raised ₹12,029.9 crore.

Also read: ‘Totally delighted’: Tata Group officially takes over Air India

The other companies that the government plans to privatise include Pawan Hans, BPCL, Shipping Corporation of India, BEML and Container Corporation of India. It has received financial bids for Pawan Hans and Neelachal Ispat Nigam, and the privatisation process is at the concluding stage.

PSB, BPCL disinvestment plans

The disinvestment of private sector banks (PSBs) and oil major BPCL are nowhere near completion now. The COVID pandemic was among the reasons for the delay in the BPCL sell-off, as the lockdowns impeded physical inspection of facilities. 

For other privatisations, some steps have been taken. The enabling framework for the privatisation of one of the four general insurance companies has been rolled out. Though the required amendments to the General Insurance Business (Nationalisation) Act were cleared in the Monsoon session of Parliament, the candidate for the stake sale is yet to be fixed. 

The Centre sought to push the stake sale in IDBI Bank this year, but was hampered by regulatory issues. The Banking Laws (Amendment) Bill, 2021, “regarding privatisation of two Public Sector Banks” was listed for the Winter session of Parliament, but not taken up. 

Privatisation and asset monetisation were among the biggest announcements of Budget 2021. The Union finance ministry also unveiled a four-year National Monetisation Pipeline (NMP) worth around ₹6 lakh-crore. The NMP was designed to provide a clear framework for monetisation and supply potential investors with a list of assets.

Also read: Why BPCL sale is unlikely this fiscal, and what it means to the govt

Dull market conditions

Analysts say the current market conditions make it tough for the government to forge ahead with sell-off plans. Its past record does not shine, either. In FY21, the government’s disinvestment target was ₹2.1 trillion, of which just ₹32,845.18 crore was achieved. For FY20, the target was ₹1.05 trillion; the government missed it by more than 50 per cent.