New Delhi: India will struggle to achieve even half its target from planned sales state run companies Will miss more this year disinvestment target Sources said this is the fifth consecutive year that the government’s priorities change with elections.
The government may fall 300 billion rupees ($3.60 billion) short of its disinvestment target in 2023/24, two government sources told Reuters. New Delhi had set a target of Rs 510 billion from disinvestment proceeds for the current financial year ending March 2024.
In 2023/24, about Rs 300 billion of the target of Rs 510 billion was expected through the sale of stake in IDBI Bank and privatization of state-owned NMDC Steel.
However, delays in vetting interested buyers for IDBI by the Reserve Bank of India, the banking regulator, have pushed the timeline for the sale beyond the 2024 federal elections.
The sale of NMDC Steel will not be completed this year due to state elections and federal elections next summer. The company’s main plant is in the mineral-rich state of Chhattisgarh, where it is a major employer and unions have opposed the sale.
While it may still achieve some small disinvestments in the current fiscal year, it will still be well short of half its total target.
Prime Minister Narendra Modi’s government has not been able to execute on plans to sell companies in several sectors, including steel, fertilizers and oil and gas, since 2019, hampered by issues such as land ownership and union opposition.
The Finance Ministry did not immediately respond to requests for comment.
Former federal finance secretary Subhash Chandra Garg said, “There will be no privatization during this tenure of the government.” “Forget disinvestment and privatization for the next six months due to lack of political interest in privatization policy.”
According to government data, so far this year the government has received Rs 80 billion from stake sale. Some of the shortfall in the current year’s target will be offset by higher dividends paid by state-run companies to the government, the first source said.
Strong profits and steady demand have allowed these companies to pay higher dividends.
The government is expected to surpass its dividend target of Rs 430 billion and has so far received Rs 203 billion from state-run companies.
“As long as the government is meeting its fiscal targets and there is no deficit, it is OK to miss the disinvestment target,” said Rahul Bajoria, economist at Barclays Investment Bank.
A third government official said the delay in privatization would not impact the government’s fiscal deficit target of 5.9% of GDP.
Despite Indian markets hitting record highs this year, the government has only managed to sell minority stakes in five of its companies through so-called offers for sale through stock exchanges. The index of state-owned entities reached an all-time high of 13,242 on November 16.
The government may fall 300 billion rupees ($3.60 billion) short of its disinvestment target in 2023/24, two government sources told Reuters. New Delhi had set a target of Rs 510 billion from disinvestment proceeds for the current financial year ending March 2024.
In 2023/24, about Rs 300 billion of the target of Rs 510 billion was expected through the sale of stake in IDBI Bank and privatization of state-owned NMDC Steel.
However, delays in vetting interested buyers for IDBI by the Reserve Bank of India, the banking regulator, have pushed the timeline for the sale beyond the 2024 federal elections.
The sale of NMDC Steel will not be completed this year due to state elections and federal elections next summer. The company’s main plant is in the mineral-rich state of Chhattisgarh, where it is a major employer and unions have opposed the sale.
While it may still achieve some small disinvestments in the current fiscal year, it will still be well short of half its total target.
Prime Minister Narendra Modi’s government has not been able to execute on plans to sell companies in several sectors, including steel, fertilizers and oil and gas, since 2019, hampered by issues such as land ownership and union opposition.
The Finance Ministry did not immediately respond to requests for comment.
Former federal finance secretary Subhash Chandra Garg said, “There will be no privatization during this tenure of the government.” “Forget disinvestment and privatization for the next six months due to lack of political interest in privatization policy.”
According to government data, so far this year the government has received Rs 80 billion from stake sale. Some of the shortfall in the current year’s target will be offset by higher dividends paid by state-run companies to the government, the first source said.
Strong profits and steady demand have allowed these companies to pay higher dividends.
The government is expected to surpass its dividend target of Rs 430 billion and has so far received Rs 203 billion from state-run companies.
“As long as the government is meeting its fiscal targets and there is no deficit, it is OK to miss the disinvestment target,” said Rahul Bajoria, economist at Barclays Investment Bank.
A third government official said the delay in privatization would not impact the government’s fiscal deficit target of 5.9% of GDP.
Despite Indian markets hitting record highs this year, the government has only managed to sell minority stakes in five of its companies through so-called offers for sale through stock exchanges. The index of state-owned entities reached an all-time high of 13,242 on November 16.
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