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New Delhi: On the last day of the September quarter (Q2) of FY2020-21, the total disinvestment proceeds raised by the Department of Investment and Public Asset Management (DIPAM) stands at Rs 5,695.63 crore, official data showed. This is just around 3 percent of the total disinvestment target of Rs 2.1 lakh crore. With two quarters of the current financial year already behind, it looks unlikely that DIPAM will be able to hit the goal by the end of it.
Even though the government has announced an ambitious privatisation plan at the beginning of this year, only two minority stake sales have taken place so far. The Centre has raised Rs 4,924.17 crore from the disinvestment of nearly 15 percent share in Hindustan Aeronautics Limited (HAL) through Offer for Sale (OFS). And another Rs 771.46 crore have come from the minority stake sale of 12.82 percent share in Bharat Dynamics Limited (BDL) via OFS. The government had originally planned to offload 15 percent share in BDL, however, since the offer was under-subscribed, it could only raise Rs 771.46 crore.
The two of the biggest disinvestment plans for the year — Bharat Petroleum Corporation Ltd (BPCL) and Air India — which were expected to chip in the largest share of proceeds to the government's overall disinvestment target have seen multiple extensions over the past few months. Citing requests received from potential bidders in the wake of the COVID-19 situation, the DIPAM has announced four extensions for bid submission for BPCL sale and Air India so far.
Sources who spoke to PSU Watch on the condition of anonymity have said that the BPCL disinvestment plan is unlikely to materialise in this financial year. And as far as the Air India sale is concerned, sources have said that while interest from bidders has not withered, extension will have to be given if they are sought if one wants to attract potential investors.
The initial public offer (IPO) of Life Insurance Corporation (LIC) is another big disinvestment plan that the government had been banking on to meet its humongous disinvestment target. However, the process is bound to be a lengthy one as it involves legal and legislative issues. The government is expected to take about 8-9 months to prepare accounts and do the required legal work before an IPO could be launched because the listing will require amending the LIC Act. Amendments will have to be made to Sections 24, 28 and 37 of the Act. With only two more quarters to go, the LIC IPO also seems likely to be announced in this financial year.
The Indian economy suffered its worst quarterly performance in Q1 of 2020-21, contracting by about 24 percent in the backdrop of the COVID-19 pandemic. And experts have said that in the second quarter, Gross Domestic Product (GDP) contraction in Q2 is expected to be around 12 percent, with a patchy recovery.
The equity markets, however, have recovered decently and by September, they have reached pre-COVID levels. The shares of listed PSUs have, however, seem to have not recovered. The S&P BSE CPSE index was at about 900 at the end of September, whereas the index was around 1300 in February 2020. The PSU index is about 1/3rd lower than the levels about 5 years back and 40 percent lower than its five-yearly peak in 2017-18. The numbers do not augur well for the government's disinvestment plans as it means that if the government goes ahead with its minority stake sale plan or strategic disinvestment plan, it may not be able to realise the true value of its own assets.
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