Union Budget 2024: What to expect on government’s disinvestment target

Finance Minister Nirmala Sitharaman

Disinvestment refers to the strategic selling or liquidation of government-owned assets, usually in the form of shares in state-owned companies and other assets. It is a crucial aspect of fiscal policy.

Reducing government ownership and control over certain businesses or industries is the main objective of disinvestment. Ahead of the Union Budget 2024, the government is set for a review of the disinvestment target for FY24 amid the shortfall in the targets set in the previous fiscal year.

The Union Budget for FY 2023-24 had set a disinvestment target of Rs 51,000 crore. However, the government has realised only Rs 10,051 crore so far.

Disinvestment is a financial strategy that involves selling or liquidating assets. It is commonly associated with governments selling shares in state-owned or public-sector companies and other assets to raise funds.

Government likely to revise disinvestment target

The government, through disinvestment in various Central Public Sector Enterprises (CPSEs), has so far raised Rs 10,051 crore in FY24. This significant deficit means the government could expedite the process to disinvestment goal for the current fiscal year.

The finance ministry is depending on dividends from non-financial CPSEs to make up partially for the shortfall. Some respite has been provided since the budget estimate of Rs 43,000 crore from CPSE profits has already been reached with one quarter still left in the fiscal year. Although the precise amount is still unknown, dividends are expected to make up a portion of the disinvestment gap.

The estimated disinvestment target for FY 2024-25 is anticipated to be determined at the Budget Committee deliberation.

The Union Budget 2024 holds significance for the disinvestment goals, with the government facing the challenge of revising its targets considering the current shortfall. The upcoming budget will be closely watched as the government is expected to strike a balance between fiscal objectives and the need for strategic disinvestment.

Historical context of disinvestment

The disinvestment strategy has its origins in the liberalisation policy that was initiated in July 1991. Many public sector undertakings (PSUs) of the time showed negative returns on capital employed, turning them into liabilities as opposed to assets. Numerous undertakings that were once considered the cornerstones of development had grown to burden the government. Since then, the disinvestment programme has gradually allowed succeeding governments to sell off shares in ailing or loss-making PSUs.