How close is the govt to its divestment target for FY23?

The Cabinet Committee on Economic Affairs has approved the sale of the government’s entire remaining stake in Hindustan Zinc Ltd, or HZL. According to the closing price of the company’s shares on Thursday, the sale of the entire 29.5 per cent stake would fetch around Rs 37,400 crore.

As reported by Business Standard, an official has said that the government might sell its HZL stake in tranches through an offer for sale, or OFS.  

So far, in the current financial year, the Centre has collected 23,575 crore rupees in divestment proceeds through the Life Insurance Corporation of India IPO and the offer for sale of Oil and Natural Gas Corporation.

If the Centre successfully carries out the divestment of HZL, it will find itself in striking distance of its Rs 65,000-crore divestment target for financial year 2022-23.

This is good news. Especially given the uncertainty surrounding the government's plans due to Russia's invasion of Ukraine. But we need to dive a little deeper.

After setting ambitious divestment targets in the last three years, the Centre, in Budget 2022, pegged the FY23 target at a conservative Rs 65,000 crore. 

The pandemic and the Ukraine war have hampered the Centre’s divestment and privatisation plans in recent months. In April, the Centre missed its revised divestment target for the second time in three years even after slashing it by 55 per cent to Rs 78,000 crore in the Union Budget. 

Compared to the target, the FY22 divestment mop-up was Rs 13,530 crore, which included the Rs 2,700 crore received by the Centre from Air India's privatisation.

So, what does the relatively better performance this year mean for the government?

Madan Sabnavis, Chief Economist, Bank of Baroda expects govt might exceed target, and more divestment is in the pipeline. This will help with fiscal math, he says, adding that it will help govt in light of projected revenue slippages.

However, the government has had a bumpy ride as far as privatisation is concerned. 

In the case of Central Electronics and Pawan Hans, the nearly-completed privatisation transactions have hit a roadblock because of the winning bidders having pending legal cases against them.

Then there is the big-ticket privatisation of Bharat Petroleum Corporation Ltd, which has fallen through with just one bidder remaining in the fray. At present, the government is working on a new strategy for selling its stake in the oil PSU.

And, according to news agency PTI, the government is on course with the privatisation of two public sector banks (PSBs) -- Central Bank of India and Indian Overseas Bank.

It is also planning to sell indirectly held stakes in ITC and Axis Bank. And it is also trying to complete the sale of Shipping Corporation of India. Strategic disinvestment of Container Corporation of India is also lined up.

Madan Sabnavis says the govt will go slow on privatisation. No clear cut case like Air India at present. So, it looks like the government has decided to follow Infosys' philosophy of 'under-promise, over-deliver'?