Central Idea

India’s disinvestment process, primarily focusing on minority stake sales rather than full privatisation, is expected to fall short of its fiscal year 2024 target.
The government’s cautious approach, influenced by the upcoming general elections, has led to a slowdown in the privatisation of major public sector undertakings (PSUs).

Disinvestment Performance and Targets

Past Achievements: Over the past decade, disinvestment has generated over ₹4.20 lakh crore, but the current fiscal year’s target appears challenging.
FY24 Target: The government set a disinvestment goal of ₹51,000 crore for FY24, a reduction from the previous year’s estimate.
Major PSUs on Hold: Plans for the privatisation of Bharat Petroleum Corporation Ltd (BPCL), Shipping Corporation of India (SCI), and CONCOR have been deferred.
Progress So Far: Approximately ₹10,049 crore, or 20% of the budgeted amount, has been raised through IPOs and OFS.
Pipeline Projects: Strategic sales of CPSEs like SCI, NMDC Steel Ltd, BEML, HLL Lifecare, and IDBI Bank are planned but face delays due to various procedural hurdles.

Political Considerations: Strategic disinvestment decisions are being influenced by the upcoming elections, leading to a cautious approach.
Challenges in Strategic Sales: The sale process involves multiple stakeholders and complex procedures, making it a lengthy affair.
Public and Political Resistance: Certain sectors, particularly defence and shipping, face opposition to privatisation, causing delays and policy reassessments.
Economic Think Tank Views: Observers note a recent slowdown in PSU stake sales, attributed to regulatory processes, global economic volatility, and shifting government priorities.

Post-2014 Strategy: Since 2014, the government has revived its disinvestment policy, focusing on stake sales and listing of PSEs on the stock market.
Union Budget 2023-24: The disinvestment target for FY24 is the lowest in seven years, with the government yet to meet the target for 2022-23.
Reasons for Disinvestment: The government undertakes disinvestment to reduce fiscal burdens, finance deficits, invest in development, and retire debt.
Types of Disinvestment: The process includes minority disinvestment, majority divestment, and complete privatisation, managed by the Department of Investment and Public Asset Management (DIPAM).

Meeting Targets: The government has met its disinvestment targets only twice since 2014.
Challenges in Execution: Strategic sales have been complicated by various factors, including market volatility and political opposition.

No New Additions: The government plans to continue with the already announced privatisation of state-owned companies without adding new ones.
Challenges and Vision: Observers suggest that disinvestment should align with the government’s long-term vision for privatisation and sectoral presence, rather than being driven solely by revenue needs.

Strategic Policy Shifts: The government’s disinvestment strategy is evolving, balancing between raising revenues and managing political and public sentiments.
Impact of Upcoming Elections: With general elections approaching, the focus on disinvestment might shift, impacting the progress and priorities of stake sales.