Divestment likely to cross Budget target after 7 years

The Union Budget for 2017-18 set the government's total divestment target at Rs 72,500 crore for the fiscal year and according to reports, the government is likely to surpass that target. As of today, the divestment through strategic sales has already touched Rs 52,500 crore.

If the target is crossed, this will be the first instance of it happening in seven years.

For the past seven years, the government has not been able to achieve its divestment targets. For instance, in the 2009-2010 Budget, the target was as high as Rs 24,581.43 crore but only Rs 1,100 crore was achieved. And this trend was carried on for seven years after.

Divestment targets have been met only thrice out of the 16 times the Indian government has set them. This year's target was the highest in the past 7 years and accounted for 0.4 percent of the GDP.

Divestment procedure is when the government sells its stake in state-owned undertakings to private firms.

The government had announced its decision to issue units of the Bharat-22 Exchange Traded Fund (ETF) in its budget speech for the current fiscal year. The ETF is now likely to be the reason the government will achieve its divestment target this year.

The Bharat-22 ETF comprises shares of 22 state-run firms like Oil and Natural Gas Corporation (ONGC), State Bank India (SBI), among others. The issuance, through which the government sold minority stake in numerous state-owned companies, garnered close to Rs 14,500 crore and was oversubscribed four times.

Secretary for Divestment and Public Asset Management (DIPAM) Neeraj Gupta confirmed with the Economic Times that the strategic sales target is currently touching Rs 52,500 crore, including the listing of insurance firms. The targeted proceeds from strategic sales, which are a part of the divestment target, was only Rs 15,000 crore for the current fiscal.

There has also been a marked increase in reception for strategic sales and as a result, the government has initiated the process for both Air India and the merged HPCL-ONGC entity.

Many experts have pointed out that the government usually sets divestment targets that "mostly unrealistic" and are hardly achieved.