SITHARAMAN MAY OPEN DOORS FOR PRIVATE FIRMS IN ALL PUBLIC SECTORS

Finance Minister Nirmala Sitharaman recently signaled a transformative shift in India's economic policy, suggesting that private companies may soon have the opportunity to invest in all public sectors.

In an interview with The Economic Times, Sitharaman stated, "There is no sector that is entirely reserved only for the public sector. That policy was part of the Finance Bill 2021 and has the cabinet's approval. I abide by it."

Sitharaman emphasised that the policy remains aligned with the 2021 budget statement, which opened all sectors to private investment. She also noted that while disinvestment wasn't highlighted in the latest budget, asset monetization "can be better." The government has maintained a disinvestment target of Rs 50,000 crore for the fiscal year 2024-25.

Performance and targets

In FY24, the government exceeded its revised disinvestment and asset monetization target of Rs 30,000 crore, achieving Rs 16,507 crore and Rs 16,000 crore, respectively. Additionally, dividend collections from central public sector enterprises (CPSEs) and other entities reached Rs 63,749 crore, 27.5 per cent higher than the revised estimate of Rs 50,000 crore, indicating robust performance by state-run firms.

Strategic divestments

For the current fiscal year, the government has collected Rs 4,918 crore in dividends and plans to conclude the privatization of IDBI Bank, as well as divest stakes in Shipping Corporation of India and NMDC Steel. This is expected to boost divestment revenue significantly. DIPAM Secretary Tuhin Kanta Pandey highlighted a "calibrated disinvestment strategy" to avoid market disruption and ensure value creation for CPSEs.

IDBI Bank divestment

The Reserve Bank of India (RBI) has given its 'fit and proper' approval to bidders for IDBI Bank, marking a key step in the government's divestment plan. Initiated in May 2021, the divestment process is nearing completion with IDBI Bank's market cap approaching Rs 95,000 crore.

The government and Life Insurance Corporation (LIC) plan to sell a 60.7 per cent, potentially realizing around Rs 29,000 crore.

Recent challenges in the divestment process have led the Modi government to possibly reconsider its privatization agenda. Instead, the focus may shift towards restructuring state-run firms. Despite earlier plans to privatize several state-run companies, including two banks and one insurance company, only the sale of Air India to the Tata Group has been completed. The interim budget did not disclose figures on stake sales, a departure from previous practices.

In her 2021-22 budget, Sitharaman announced the privatization of two state-run banks and one insurance company. However, progress has been slow, with some plans reversed and only a minor stake in LIC sold.