Budget 2021: ‘Come What May, I Will Sell’ Not Our Strategy: Divestment Secretary

The government will not sell state-owned firms to only meet its disinvestment targets, according to Tuhin Kanta Pandey, secretary of the department that manages its equity stakes in public sector units.

“We don't want the constant question of filling up the (fiscal) gap. If you go by one target (for disinvestment) and say, ‘come what may, I will sell', I am afraid that's not the strategy we are going to adopt,” Pandey, secretary in the Department of Investment and Public Asset Management, said in an interview with BloombergQuint.

Pandey cited lack of appetite in the market to defend the government's poor record on disinvestment in the ongoing fiscal. Some of the big-ticket selloffs of public sector firms such as Bharat Petroleum Corp. and Air India coincided with the Covid-19 pandemic, he said, but it's “behind us”.

Terming the new privatisation policy announced by Finance Minister Nirmala Sitharaman as the “biggest structural reforms after 1991”, he said it will be rolled out in four-five years. But the secretary didn't explain why the government went back on its earlier plan to capping the number of state-owned operating in strategic sectors.

Key Highlights:

• Government mopped up around Rs 20,000 crore through disinvestment and close to Rs 18,000 crore as dividends in the year of the pandemic.
• Disinvestment itself is a much smaller pie of the total (revenue deficit). It's not correct to assume that disinvestment led to a shortfall in revenue targets as the exercise was severely impacted by the pandemic.
• Huge amount of expenditure cannot be met only through disinvestment. The market gap of government's equity is about Rs 6 lakh crore.
• The government will try to close some of the firms in the disinvestment pipeline by April-May.
• Privatisation of banks will require an amendment to the law.
• Valuation of state-owned firms, a key factor in stake sale, is dependent upon control and they go up if market feels that private players are in a better capacity to take the firm forward