DIPAM Secretary sees FY25 disinvestments at around Rs 35,000 crore, but govt has flexibility

The government has not fixed a specific disinvestment target for 2024-25.

The government may look to book around Rs 35,000 crore from disinvestments in 2024-25, although it has the flexibility to do less or more than that, according to Tuhin Kanta Pandey, Secretary of the Department of Investment and Public Asset Management. "…it could be around 35-15 (Rs 35,000 crore from disinvestment and Rs 15,000 crore from asset monetisation), that sort of a thing," Pandey told Moneycontrol in an interview.

"The fact is that we don't have a fixed number. It's an overall thing. It also lends an element of fungibility (between money raised from disinvestments and asset monetisation)," he added.

Also Read: No fixed disinvestment target in FY25 Budget, says DIPAM Secretary

Pandey's comments come in the wake of the Interim Budget presented on February 1, which estimated the Centre will get Rs 50,000 crore in 2024-25 in the form of 'Miscellaneous Capital Receipts', without specifying how much would be from disinvestment.

In the 2023-24 Budget, 'Miscellaneous Capital Receipts' stood at Rs 61,000 crore, with disinvestments at Rs 51,000 crore. The overall figure has been revised down to Rs 30,000 crore, with Pandey saying that around Rs 18,000-20,000 crore is expected to come from stake sales in what remains of the current financial year and a further Rs 10,000-12,000 crore from asset monetisation.

So far this year, the Indian government has raised Rs 12,504 crore from disinvestments.

Edited excerpts:

Without a disinvestment target, there is no pressure on you now.

I would say we have learnt from experience that we need to have a calibrated approach. And we have to look at it all together. One item of disinvestment taking possibly a very enormous amount of attention, whereas something where we are realising three times (what was expected) was not even getting (any attention)… Dividend, for example, sometimes we were getting Rs 60,000 crore but not getting any attention.

Also Read: Budget pegs RBI, PSU banks dividend in FY25 at Rs 1.02 lakh crore

Now, non-tax revenue has increased from Rs 3 lakh crore BE (budget estimate) to Rs 3.75 lakh crore RE (revised estimate) in 2023-24. And if you take BE to next BE, it is Rs 3 lakh crore to Rs 4 lakh crore. So that is an important source of revenue. Just because it is an accounting term, a capital item (disinvestment) is coming elsewhere.

I think this has been a thinking trap (so far). Disinvestment, dividend, all these items are linked to market dynamics of the CPSEs (Central Public Sector Enterprises). CPSEs are very much market players. And their management should also be market oriented.

What a normal promoter should do, I think, the government should also do that. It's not that the government should do something extraordinary. If we have wealth to manage, we have a certain income to draw. And there are many more fiscal years to come. If you go by that, it is prudent wealth management and also good income management which will keep the entire dynamic stable. And that is a principle we are bringing in and stating upfront also.

You said there are many years to come. So the fact that there is no specific target in the Interim Budget, does that mean this is a new practice now which will be followed going forward also, with no specific disinvestment target?

Well, I think that's the way to go. How much (disinvestment) you have to do also depends upon what is the situation at the time. Suppose I am right now in a capex phase for the particular CPSE. So, my top priority should be my existing investments are giving returns and how I should complete my projects fast so that I step up to the new level of bottomline and top line. Because only when you increase your turnover and make sufficient margins, EBITDA margin, then only you will be able to get into a new re-rating phase – your stock price will then rise to reflect that.

This is not the same cycle in every stock or sector. Now in one sector, it may be something different at the moment. There is no point then pressing for a stock there. So there is nothing called a one-size-fits-all. That is a problem with a single number and single approach – you don't really see what the environment is. Then we have to make large adjustments.

You have certain expectations and your reality turns out to be completely different, especially the way volatility has been in the last two-three years. Sometimes it builds up the market momentum and sometimes it falls and then there is a crisis. And different CPSEs are impacted differently. In that situation, if you have this kind of volatile (disinvestment) number being asked to give a very important fiscal measure, then I think there will be disappointments and unnecessary tensions.

You have to build up on stable revenues. When you have a Rs 47 lakh crore budget, extraordinary expenditure or extraordinary revenue are not the fundamentals of budget management. They may have an impact – they may absorb and give shocks. But they should not be based on a stable thesis that a gap will be filled by this.

We will be consistent with a value maximisation pick and bring in resources. Suppose we do not shed the shares today. The shares are there to be shed tomorrow or the day after. It is not that it is going anywhere. Meanwhile, they continue to give income as well. The question is how do we balance these competing imperatives? That is the way we should do a much more intelligent public asset management than be simply driven by numbers.

Even on the dividend side, for example, though it is far more stable an item than disinvestment, our expectation cannot be built on a short-term basis. We have got a consistent dividend policy rule, not a maximum dividend policy rule. It is 30 percent of PAT, not 90 percent. The reason being that we have to fuel growth.

Many of our companies which are so-called brown companies are becoming green companies very fast. So they have to invest in green energy and green transition. So they have to fund those projects, which means they have to bring in equity – which is retained earnings – and they will also take debt. Once a company is growing profitably, it gives rewards in terms of high stock prices. Capital gains happen, revenues will also come in, and overall health of the enterprise is also key. So, value maximisation is the strategy. Within that, disinvestment and dividend will come as a resource.

Did you consider removing the entire disinvestments sub-head from the budget altogether?

Some people have suggested that. Some people have suggested that only the receipts should be booked as and when they come and don't put it as a budget figure.

What do you think?

I would say that, in accounting terms, even if you show with a very clear thing and don't attach a significance to that number and don't make it so relevant to the overall scheme of things by giving it a too high (a number) in your accounting, then it could really start pinching you if it doesn't happen.

It will come somewhere in the accounts. But there should be an expectation that it is subject to readjustment.

At this stage, when we have capex-led growth and we have to fire on all cylinders – not only the government but also the CPSEs – our policy should be consistent with what we are doing on the other side. So your capex and growth policy, your dividend policy or disinvestment strategy, these are all interlinked. Locking them into an isolation creates a problem because you don't realise that if you do very well on one, you're actually doing poorer on the other.

Asset monetisation is also included in the RE?

Yes.

We have done Rs 12,500 crore disinvestment so far in 2023-24.

We are at Rs 18,000-Rs 20,000 crore (disinvestment) and Rs 10,000-12,000 crore asset monetisation perhaps. I am talking of asset monetisation which is accrued to the Consolidated Fund. Asset monetisation is actually much more. But CPSE, et cetera, doesn't come to the government.

So can we assume a similar break-up for 2024-25 also?

Yes, it could be around 35-15 (Rs 35,000 crore from disinvestment and Rs 15,000 crore from asset monetisation), that sort of a thing. The fact is that we don't have a fixed number. It's an overall thing.

It also lends an element of fungibility. There also the imperative is similar in the sense that certain cash flows are actually suspended…whether it is InvIT, securitisation, or ToT. Your tolls are coming over a period of time and you bundle them up and give the tolling rights to somebody and you use that money to make more capex. So, to that extent, your debt is less. In government agencies it feels all right. But in case of CPSEs, sometimes it may not. In case of PSEs which are listed, if you are making another unit holder a claimant, you are separating that asset to the extent that assets' returns are not coming for your existing shareholders. So unless and until that money you raise has got a higher return… So with CPSEs, if they do asset monetisation, they have to balance whether it is worth doing asset monetisation or not, because they have existing shareholders also. So, if you part with an asset, the returns of the existing shareholders will also fall – unless the money raised by the CPSE is used for projects which give you more than 10-12 percent return.

Also Read: Disinvestment will not be driven by short-term fiscal priorities, says Finance Secy

On Life Insurance Corporation of India (LIC), are you looking at any further reforms? You had held non-deal roadshows last year.

LIC is a long journey we have to undertake. First, there was a big question of 'Can we list LIC?'. Even to think of listing LIC was mentally a big leap forward because anybody would be so resistant to it – 60 years, behemoth, Rs 40 lakh crore of investments, insurance policies running into 400 crore. But once we went into listing mode, we found that we were doing this for the next 20 years. This organisation cannot remain in the unlisted space for another 20 years.

So, from that day to today, a couple of years, LIC has taken several leaps forward internally. Their entire actuarial software has undergone a big change. They have installed a new software and brought every policy into that. That's an enormous change. This itself was such a feat – that kind of quantitative work, reconciliation, external reporting actuary, reporting of embedded value for the first time. In fact, I am still not very satisfied that there is little talk of embedded value. It's such an important indicator in insurance companies. So embedded value has grown. Things have really shaped up. Every half year, embedded value comes in, which gives you a reassurance about what it is worth and what is the value inherent.

On all fronts, I think LIC is improving very fast. Look at the earning profile, solvency has improved. Now, there is some concern about the market share. They are working hard to retain it. And they are also saying 'now profitable market share'. In fact, some of the products they have closed. Although they were high growth projects, they found that they will not be able to make sustainable profits out of it. So they have closed those things and they have issued a number of non-par products. Their non-par portfolio was rather weak. They have launched a digital transformation project. BCG has been hired.

Does this mean LIC is far more valuable than what the current share price is suggesting?

I am not commenting because we being promoters, should not be really saying these things. I am only saying that you see the progress. We are making it market oriented. Market is realising that. This digital transformation is a very important project for LIC. And I think that can really spur LIC into becoming a very smart organisation. There HR also needs to be looked at; they are looking at it.

What about Shipping Corporation of India Land and Assets Limited (SCILAL)?

I think within a month it will be done. A Board has been constituted for SCILAL by the Ministry of Shipping and certain decisions have also been taken by the Maharashtra government. The Cabinet has given stamp duty exemption on this demerger, et cetera. So from SCI to SCILAL, the lease transfers, the lease name change, et cetera is taking place. And I think within a month it will be listed.

What is the update on some of the other transactions? Will IDBI Bank be done in 2024-25?

Yes, 2024-25, of course. I think we should be able to do it.

What about Bharat Petroleum Corporation Limited (BPCL)?

BPCL, we have not really re-launched the transaction yet. We went through the process, we went halfway. After that bidders expressed their inability…we need a competitive set of bidders to be there. We can't discover a value based on one single bidder. And then there was so much turmoil in the oil and gas market and there were those who wanted to put a bid but didn't. Once the bid was made, things changed because of the Ukraine crisis and all kinds of things. Even now, energy markets are dicey. Suddenly there's a Red Sea issue now. So, the government has to make up its mind. The Ministry of Petroleum is also an important interlocutor there. When that is decided, EoI (Expression of Interest) will be launched.

What about Container Corporation of India (CONCOR)?

That also EoI we haven't launched.

On the whole, the fact that tax collections have been growing robustly, has that reduced the pressure on disinvestment to deliver?

You should never make a fiscal deficit…is it the dog that wags the tail or is it the tail that wags the dog? Taxes, non-taxes, and expenditure are the key determinants of fiscal deficit. Extraordinary items like disinvestment, which are basically a wealth sale, that is not sustainable. In a crisis situation, you would say 'We have nothing to pay to somebody, okay you sell your assets'. Is India in that situation? India is one of the fastest growing economies in the world. Why should we get into this kind of a crisis mode where we have to sell our family gold? It should be done in a proper way like every wealth manager or public asset manager will do. That has to be the goal of framing the budget.