Budget 2024: Disinvestment, asset monetization receipts likely to be unchanged

The government is likely to keep its revenue target from disinvestment and asset monetization in the upcoming Union Budget at around the same levels of ₹50,000 crore as in the interim Budget.

Two officials familiar with the government's thinking said a shift in strategy of not keeping a separate target for disinvestment and looking at receipts from dividends holistically, will continue. This comes at a time when receipts from dividends have risen significantly in FY 24, crossing budget estimates, on the back of a rally by listed public enterprises.

“Some of the transactions are ongoing, and not much has changed from the interim Budget, the approach to not have targets for divestment will continue,” one of the officials said asking not to be named.

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In the interim budget of February this year, the government moved away from the practice of setting revenue targets from disinvestment or stake sales in central public sector enterprises which the government would either partially or fully exit. 

A full exit, called strategic disinvestment, is where a CPSE is sold to a private company and government hands over management control.

The paradigm shift led to a change in tabulation of capital receipts in the budget with asset monetization and disinvestment bring clubbed under the single head of ‘miscellaneous’, contributing ₹50,000 crore. Dividends from CPSEs were kept separate with an estimated receipt of ₹48,000 crore.

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For FY24, the government netted ₹32,507 crore, one-half of which came from disinvestment and the other half from asset monetization. The proceeds were higher than the budget estimate of ₹30,000 crore. 

Receipts from dividends have been higher than budget estimates for three years running. In FY24, the government earned ₹63,749.29 crore as PSU dividends, 26% above the revised estimates of ₹50,000 crore and budget estimates of ₹43,000 crore.

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As of 10 July, no proceeds from disinvestment had come in, as per data issued by the department of investment and public asset management. Receipts from dividends, from stakes that government holds in various CPSEs, stood at ₹4,917.6 crore.

Disinvestment receipts are usually a slow trickle, with stake sales of minority shares via FPOs (follow on public offers) or a windfall when strategic sales go through giving the government a lump sum amount in one go.

As of now, the strategic sale of IDBI Bank, where the government and LIC are jointly selling nearly 61% stake, divestment of NMDC’s steel plant in Nagarnar, Chhattisgarh; SAIL’s Salem steel plant; Indian Medicines Pharmaceuticals Corp. Ltd; Ferro Scrap Nigam Ltd; HLL Lifecare Ltd and Project & Development India Ltd are in various stages of privatization. 

Mint had reported earlier that the disinvestment of IDBI Bank was expected to pick up pace in the second-half of the ongoing financial year.

The Union Cabinet had also approved the sale of Container Corp. of India Ltd, but the process is yet to begin. The Centre also plans to list NTPC Green Energy, and has begun the process to list Indian Renewable Energy Development Agency Ltd.

To be sure, there is adequate potential for further disinvestment. CareEdge Ratings said in a recent report that there was a divestment potential of around ₹11.50 trillion. The government has undertaken disinvestment of ₹5.20 trillion since 2014. Of the potential ₹11.50 trillion, CPSEs could contribute around ₹5 trillion with public sector banks (PSBs) and insurance firms potentially adding another ₹6.50 trillion. An SBI report ahead of the Union budget also suggests that the government should go ahead with disinvestment of public sector banks as they're in 'good condition'.