Union Budget 2012: FM pegs FY13 divestment target at Rs 30,000cr

Moneycontrol Bureau

Finance Minister Pranab Mukherjee pegged the divestment target for the next financial year at Rs 30,000 crore, as against Rs 40,000 crore each in 2010-11 and 2011-12.

Even with the recent auction of Oil and Natural Gas Corporation shares, the government has garnered only Rs 13,911 crore from disinvestment in 2011-12 till date. With the likely stake sale in National Buildings Construction Corporation slated this month, the total disinvestment money this year is expected to be around Rs 14,000 crore only.

The government hoped to follow up the ONGC sale by unloading shares in Bharat Heavy Electricals Ltd (BHEL), Steel Authority of India Ltd (SAIL) and Oil India (OIL) but will need to rethink how it manages and prices those deals.

Mukherjee had earlier stressed the general government debt was largely domestic and stood at 66.4% of gross domestic product (GDP) at the end of March 2011. This was much below the average of 99.7% of GDP for advanced economies and 85.3% for the euro area for 2010, as shown in the International Monetary Fund’s Fiscal Monitor Update, January 2012, he said.

The Divestment Backdrop

On 5th November 2009, Government approved the following action plan for disinvestment in profit making government companies:

  (i) Already listed profitable CPSEs (not meeting mandatory shareholding of 10%) are to be made compliant by ‘Offer for Sale’ by Government or by the CPSEs through issue of fresh shares or a combination of both
 
   (ii) Unlisted CPSEs with no accumulated losses and having earned net profit in three preceding consecutive years are to be listed
 
  (iii) Follow-on public offers would be considered taking into consideration the needs for capital investment of CPSE, on a case by case basis, and Government could simultaneously or independently offer a portion of its equity shareholding
 
  (iv) In all cases of disinvestment, the Government would retain at least 51% equity and the management control
 
  (v) All cases of disinvestment are to be decided on a case by case basis
 
  (vi) The Department of Disinvestment is to identify CPSEs in consultation with respective administrative Ministries and submit proposal to Government in cases requiring Offer for Sale of Government equity.