Disinvestment is the process of government selling its stake in public sector companies and their subsidiaries. The money, thus generated, is used for productive use in the economy such as development of infrastructure and human resources. When the government sells its stake in state-run companies, it results in their gradual privatization.
Every year, the government sets a target in the Union budget to raise funds through the disinvestment process. However, the government has missed the target in the last five years due to various reasons, mainly the opposition from the trade unions and unfavorable market conditions.
In 2009-10, the government managed to raise 94 percent of the targeted amount through disinvestment. After that, the government has never been able to reach that level. The current financial year has been the worst with just 19 percent of the target met so far. Remember, the disinvestment target set for the current fiscal year, Rs 69,500 crore, is the highest set by any government since the disinvestment process began.
One reason for the poor show this year has been the big fall in the domestic equity markets, which forced the government to hold back its stake sale plans in state-run companies. So far this fiscal year, the Sensex has plunged over 15 percent on various global factors including US interest rate fears, China slowdown and uncertainties in the Eurozone.
"Targets are set for best efforts and affirmative action. We have to operate in an environment which cannot be predicted and managed and in present day scenario, there are more pressing global issues than the domestic conditions," Disinvestment Secretary Neeraj Gupta told PTI.
Also, Prime Minister, Narendra Modi, has always been reluctant when it comes to the privatization of public sector companies. In the current fiscal year, the government has so far managed to sell stake in five PSUs - Rural Electrification Corp (Rs 1,608 crore), Power Finance Corp (Rs 1,671 crore), Dredging Corp of India Ltd (Rs 53.33 crore), Indian Oil Corp (Rs 9,369 crore) and Engineers India Ltd (Rs 640 crore).
As finance minister Arun Jaitley is set to present his Budget for 2016-17, experts are keenly watching the target he is going to set for the next year (fiscal year 2017) since the likely volatility in equity markets would continue to pose challenges in meeting the target.
Data by Kishor Kadam
Updated Date: Feb 22, 2016 14:13 PM