Twitter
Advertisement

IRCTC listing, CPSE ETFs to help Centre meet disinvestment target

With CPSE exchange-traded fund getting huge response, the central government is confident of meeting divestment target of Rs 72,500 crore

Latest News
article-main
FacebookTwitterWhatsappLinkedin

After failing to meet the divestment target once again in 2016-17 – the seventh consecutive year to miss the target – the government is confident about raising Rs 72,500 crore in 2017-18 through disinvestment of public sector enterprises (PSEs).

The confidence stems from the positive response to the second tranche of CPSE Exchange-Traded Funds (ETFs) which managed to raise over Rs 9,600 crore last month.

The CPSE ETF is a fund that holds shares of ten central PSUs with maximum weight allocated to ONGC, Coal India, IOC and GAIL.

Jaitley’s disinvestment exercise will target stake sale in three railway units—IRCTC, IRFC and IRCON, along with relying on the ETFs for disinvestment in major CPSEs.

In the current fiscal, the government managed to raise only 66% of the revised estimate target of Rs 45,500 crore.

Often disinvestment initiatives undertaken by the government have been marked by economic expediency rather than being geared towards setting PSUs free from governmental interference.

This is evidenced by the massive failure of the government in meeting its strategic disinvestment (when the government divests equity along with management control) target for the current fiscal by a huge gap of Rs 15,000 crore. Against its inflated target of Rs 20,500 crore from strategic disinvestment, the government was barely able to raise Rs 5,500 crore.

Even the 14th Finance Commission has pointed out to the tendency of the Centre in divesting stake in PSUs without granting functional autonomy, saying that the process of disinvestment over the years has been generally ad-hoc, based on the limited approach of short-term fiscal gains to cover the budgetary revenue gaps to the extent feasible, depending on market circumstances.

Economists have argued for bolder reforms in privatisation of PSUs. A January report by the National Institute of Public Finance and Policy (INIPFP) titled, ‘Public Sector Undertakings – Bharat’s Other Ratnas’ has advocated that Maharatna PSUs should be granted greater autonomy and should be commercialised.

The report chalks out a 10-year plan to divest 50% PSU assets amounting to roughly $250 million. These funds it suggests could then be parked in a strategic investment fund to leverage private funding of the same amount. This will help India in investing an additional $50 billion per year in public infrastructure for the next 10 years.

“It should be remembered that the PSUs which were strategically divested under the previous NDA government have done exceedingly well, thereby enhancing efficiency and improving the return on assets...Ad hoc expediency based on yearly targets is not going to work,” the report said.

Find your daily dose of news & explainers in your WhatsApp. Stay updated, Stay informed-  Follow DNA on WhatsApp.
Advertisement

Live tv

Advertisement
Advertisement