Finance Minister Nirmala Sitharaman has set a high divestment target of Rs 2.1 lakh crore for FY 2020-21. The government expects to earn Rs 90,000 crore by selling stake in public sector banks and financial institutions, while the balance Rs 1.2 lakh crore is expected to come in from the sale of central public sector enterprises.
"For BE 2020- 21, disinvestment receipts are budgeted at Rs 2,10,000 crore which is inclusive of Rs 90,000 crore from sale of Public Sector Banks and other Financial Institutions. In 2021-22 and 2022-23, disinvestment receipts are expected to be up," according to Union Budget documents.
The government failed to meet the target for the current fiscal of Rs 1.05 lakh crore. Disinvestment receipts have been revised to Rs 65,000 crore in the revised estimates of 2019-20.
Sitharaman also announced that the insurance behemoth Life Insurance Corporation of India (LIC) will be listed as part of the government disinvestment initiative. The government proposes to sell a part of its holding in LIC through initial public offer, she said.
Currently, the government owns the entire 100 percent stake in LIC.
The target has been set taking into account the strategic stake sale of both big and small companies, apart from the scheduled divestment of Air India, BPCL and Concor and launch of a financial ETF to monetise government stakes in banks and financial and public insurance companies.
The financial ETF is an old programme and in fact, DIPAM has already sought advisors for it. The Government plans to expand the ETF portfolio by including stocks of PSBs, public sector insurance firms and public sector financial institutions.
In 2019, the government launched bond ETF — Bharat Bond. There are two exchange-traded funds — CPSE ETF and Bharat-22 ETF — listed on domestic exchanges. The two state-owned insurance companies — General Insurance Corp of India and New India Assurance Co Ltd — and 19 public sector banks (soon to be 10) are listed on exchanges, as well as IFCI.
In the current fiscal, the government had announced there could be strategic disinvestments where the undertaking is still to be retained in government control, to go below 51 percent to an appropriate level, on a case to case basis. It has also decided to modify the present policy of retaining 51 percent government stake inclusive of the stake of government-controlled institutions as Finance Minister Nirmala Sitharaman had said in her Budget speech.