India’s ambitious disinvestment program is set to fall short of its target for the fiscal year 2023-24 (FY24), despite having raised over Rs 4 trillion in the past decade. The government had set a budgeted target of Rs 51,000 crore for FY24, but so far, only about Rs 10,049 crore, or approximately 20% of this target, has been achieved through minority stake sales.
The disinvestment drive, which includes the strategic sale of several Central Public Sector Enterprises (CPSEs) such as Bharat Petroleum Corporation Ltd (BPCL), Shipping Corporation of India (SCI), and Container Corporation of India (CONCOR), is experiencing delays. Challenges such as the ongoing process of due diligence and demerger of core and non-core assets of CPSEs have contributed to this delay, hindering the government’s ability to invite financial bids.
Furthermore, the impending general elections, scheduled for April-May 2024, have led to a cautious approach towards privatisation. Political necessities and concerns about public opposition, especially in strategic sectors like defense (BEML) and shipping (SCI), have caused postponements and policy reassessments.
In the case of IDBI Bank, despite receiving multiple Expressions of Interest (EoIs) back in January 2023, the process has been delayed as bidders await security and ‘fit & proper’ clearances from the government and the Reserve Bank of India (RBI).
The Department of Investment and Public Asset Management (DIPAM) is currently processing around 11 transactions. However, with the complexity of the strategic sale process and the involvement of multiple stakeholders, these disinvestments are proving to be a long drawn affair. Notably, strategic transactions in 10 CPSEs over the last decade have accounted for Rs 69,412 crore of the total raised funds.
The government’s narrative has been focused on engaging the private sector as a partner in development, and the post-2014 period has seen a revival in disinvestment policy, with successful listings of Public Sector Enterprises (PSEs) on the stock market. Despite this, the recent slowdown in the pace of PSU stake sales, influenced by factors like regulatory processes, global economic volatility, and political dynamics, indicates a shift in priorities as the country approaches the general elections.
In summary, while the government has made significant strides in disinvestment over the past decade, achieving its target for FY24 remains a challenging task. The complexity of strategic sales, political considerations, and economic factors continue to influence the pace and direction of India’s disinvestment strategy.