Finance Minister Nirmala Sitharaman has signaled a transformative shift in India's economic policy, suggesting that private companies may soon have the opportunity to invest across all public sectors. "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 stated.
Sitharaman emphasized that the policy remains aligned with the 2021 budget statement, which opened all sectors to private investment. Although disinvestment wasn't highlighted in the latest budget, she noted that asset monetization 'can be better'. The government has maintained a disinvestment target of Rs 50,000 crore for the fiscal year 2024-25.
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 percent higher than the revised estimate of Rs 50,000 crore, indicating robust performance by state-run firms.
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.
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 percent stake, potentially realizing around Rs 29,000 crore.
Recent challenges in the divestment process have led the Modi government to 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. This cautious approach indicates a possible strategic pivot towards improving the operational efficiency and financial health of public sector enterprises rather than outright privatization.
Sitharaman's recent statements highlight a continued commitment to opening up the public sector to private investment, aligning with the broader economic reforms initiated in the Finance Bill 2021. While the government's strategic disinvestment and asset monetization targets remain ambitious, the approach appears to be evolving towards ensuring market stability and maximizing value creation from public assets.