India's divestment deals on slow burner: DBS

Progress on India's divestment front has been slow in the first four months of this fiscal year, a Singapore-based bank said on Wednesday. "With subdued growth prospects expected to keep a lid on tax collections, indirect taxes and divestment receipts will be important to fund public infrastructure spending plans," said DBS in its daily economic report. The divestment target is pegged at an ambitious INR 69500 crore (0.6 percent of the Gross Development Product) for this fiscal year, two-thirds of which will be through stake sales in public sector companies.

But DBS pointed out that past records have been unimpressive, with less than half the targets met and bulk of the stake-sales left to the last quarter of the fiscal year. "Earlier suggestions were that this year will be different, with a more regular stream of asset sales. The process is however off to a slow start with only two sales concluded so far," noted the bank, which also operates in India.

The most recent was a five percent stake in the state-owned Power Finance Corporation (PFC). Under revised norms, about INR 1600 crore is likely to be raised through this sale, adding to INR 1550 crore back in April. Cumulatively, these account for about five percent of the overall divestment target, pointing to a lacklustre start.

"Rhetoric nonetheless remains positive and signs are that the pipeline of stake sales is strong," it observed. The divestment department laid out plans to sell stakes in over 10 companies, DBS noted from press reports. Two big ticket oil companies' - ONGC and IOC - stake sales could potentially raise a third of the full year's target.