Asked to garner a massive Rs 69,500 crore this fiscal, the Department of Disinvestment has told Finance Ministry it may be able to raise only about Rs 30,000 crore given the volatile market conditions.
Terming Rs 30,000 crore as a more “realistic” target, the Department has said that a higher target was becoming “counter-productive” in framing of a strategy for sale of shares due to market volatility.
The red flag has been raised even as the government earlier this week raised Rs 1,600 crore from a highly subscribed share sale in Power Finance Corporation (PFC).
If achieved, Rs 30,000 crore would still be the highest-ever disinvestment kitty in a year for the government.
Although the government has missed its divestment target for five years in a row, the target for the current fiscal 2015-16 was set at a massive Rs 69,500 crore — 180 per cent higher than the total amount garnered from PSU share sales in the previous fiscal.
“Unavailability of high-value stocks adds to the constraint. Rs 30,000 crore is a realistic target in this market condition which has been conveyed (to the Finance Ministry),” a highly-placed source said.
Of the targeted Rs 69,500 crore, Rs 41,000 crore was to come from minority stake sale in PSUs and further Rs 28,500 crore from strategic stake sales.
“With this target, the growth rate in disinvestment proceeds would need to be around 180 per cent. This is much higher than the tax revenue growth rate of 16 per cent and that of Government bonds of 10 per cent,” the source said.
In 2014-15, the government raised around Rs 25,000 crore against the target of Rs 58,425 crore. The Rs 58,425-crore target included Rs 43,425 crore from minority stake sale and Rs 15,000 crore from residual stake sale in erstwhile PSUs.
For disinvestment in 2015-16, the government has a pipeline of over 20 PSUs for which it has cabinet approval.
This includes, 10 per cent stake sale each in OIL, IOC, Nalco, NMDC, besides, 5 per cent in NTPC, ONGC, BHEL.
Even as these PSUs would fetch high returns, they would not be able to match the proceeds DoD had garnered via share sale of Coal India last fiscal. The government had sold 10 per cent in CIL in January and raised Rs 22,600 crore.
“For 2015-16, the disinvestment department has promised Finance Minister the highest ever disinvestment proceed in any fiscal. Because of the pressure of high target, the actual realisation gets impacted as strategy cannot be worked out properly,” a source said.
Despite volatile stock markets, the DoD has delivered successful stake sales in two PSUs — REC and PFC. It has raised Rs 1,550 crore from REC, while PFC stake sale fetched around Rs 1,600 crore.
The source said that the disinvestment department is of the view that there is no certainty of the stock market amid the slump in Chinese market and impending US Fed rate hike.
“A higher target could be counter productive in this market condition as the it increases pressure to bring stake sales hurriedly without building adequate demand for the stocks on offer,” the source said.
Also the market condition is such that even private sector companies are not accessing the market with fund raising plans, the source added.
The government has missed its disinvestment target for five consecutive financial years. In 2010-11 and 2011-12 fiscals, the government had raised Rs 22,144 crore and Rs 13,894 crore through disinvestment, against the budgeted target of Rs 40,000 crore in each year.
In 2012-13 fiscal, the government had raised Rs 23,956 crore as against the target of Rs 30,000 crore, which in 2013-14 it raised Rs 16,027 crore against a target of Rs 40,000 crore.
In 2014-15 fiscal, the government raised around Rs 25,000 crore against the target of Rs 58,425 crore.