Budget 2023: Govt may not come up with fresh divestment plans; likely to focus on privatisation of already announced PSU firms

In the upcoming Budget 2023, the government is unlikely to announce any fresh divestment plans for public sector companies rather it will move ahead with the already-announced and planned privatisation of state-owned companies in the next fiscal, according to sources.

The disinvestment target outlined in the Budget for the next fiscal is likely to be a scaled-down and realistic one, as the budgeted PSU sell-off target is going to be missed for the fourth year in a row this fiscal.

In the current fiscal, the government had budgeted to collect Rs 65,000 crore from disinvestment. However, so far, it has realised only Rs 31,106 crore by selling minority stakes in public sector companies.

Also Read - From fiscal deficit to tax slabs: Ex-Finance Secretary SC Garg on Budget 2023

After tasting success in privatising loss-making Air India in 2021, the progress of PSU sell-off has not been very impressive over the past year, and experts say that with the general election around the corner in 2024, no major disinvestment announcement is expected in this Budget either.

"The plan is to move ahead with the strategic sale of the companies for which the Cabinet approval is already in place," an official told PTI.

This means that the government will go ahead with the privatisation of companies like Shipping Corporation of India, NMDC Steel Ltd, BEML, HLL Lifecare, Container Corporation of India and RINL or Vizag Steel, as well as the big ticket IDBI Bank.

Considering that strategic sale or privatisation takes at least a year, and in some cases even more, to conclude, a high budgeted disinvestment target may not be achievable.

Also Read: Last full budget ahead of 2024 general polls: Will Budget 2023 be populous or pragmatic? Experts explain

Nangia Andersen LLP, Partner- Government and Public Sector Advisory, Suraj Nangia said: "The privatization process often takes time, depending on the type of privatization and the economic, social, and political context, emphasizing the importance of a medium-term plan, a solid regulatory framework, and competitive markets".

"A multi-year strategic plan for privatisation can be formulated to ensure there is a concrete timeline and a well-designed sequencing and strategy for privatisation," Nangia said.

EY India, Associate Partner, Tax and Economic Policy Group, Rajnish Gupta said the privatisation programme may see an uptick after the 2024 general elections.

"Maybe this year's Budget is going to be a little muted and we may see announcements around disinvestment and sale of minority stakes. After 2024, we may see an acceleration in the privatisation programme again," Gupta said.

Also Watch: Union Budget 2023: An Explainer on Capital Expenditure and Revenue Expenditure

In the past year, the government had called off a couple of strategic sales, including BPCL, due to a lack of investor interest. Experts feel that the private sector will be more keen on buying state-owned companies if their deal is sweetened with tax incentives and regulatory exemptions.

Nangia said private sector participation is more likely to be successful when the required information is accurate, such as that of the operating performance, the condition of assets etc.

"An important factor considered by investors as they decide on bidding in privatisation programme is a 'predictable regulatory environment and absence of undue administrative impediments to business in general'. 

With PTI Inputs