Government to fall short of divestment targets

The government is likely to struggle to achieve even half of the targeted proceeds from the planned sales of state-run firms in the current fiscal year, marking the fifth consecutive year of missing divestment targets, according to sources. The government might fall short by Rs 30,000 crore ($3.60 billion) in 2023-24, with a target of Rs 51,000 crore from divestment proceeds for the year ending March 2024.

Delays in vetting interested buyers for IDBI Bank and the privatisation of state-owned NMDC Steel have contributed to the shortfall. The sale timeline for IDBI Bank has been extended beyond the 2024 federal elections due to delays by the Reserve Bank of India. The NMDC Steel sale is also delayed due to state and federal elections, with protests from unions in the mineral-rich state of Chhattisgarh.

Despite potential smaller divestments, achieving even half the overall target seems challenging. The government's plans to sell companies in various sectors have faced obstacles since 2019, including issues with land ownership and union opposition.

So far this year, the government has received Rs 8,000 crore through stake sales, and some of the current year's shortfall may be offset by higher dividends paid by state-run firms to the government. The government expects to surpass its Rs 43,000 core dividend target, having received Rs 20,300 crore from state-run firms.

While the delays in privatisation are not expected to impact the fiscal deficit target of 5.9 per cent of GDP, missing divestment targets remains a recurring challenge for the Indian government.

(With PTI inputs)