Budget 2023: Centre Likely To Lower Divestment Target For FY24, Says Report

The report also said that the government would try to raise money by selling more shares of LIC, Shipping Corporation of India, and exiting holdings of Specified Undertaking of UTI

In the fiscal year 2022-23, the government had a divestment target of Rs 650 billion. 

The government is likely to lower its divestment target for the upcoming fiscal year 2024, reported by news agency Reuters. The news agency cited a Kotak Institutional Equities note saying that the Centre is likely to set a conservative target for disinvestment of state enterprises after mop-up fell short this year. 

The reported quoted Kotak Institutional Equities note saying, "We pencil in divestment receipts of Rs 350 billion ($4.30 billion) in 2022/23...For 2023/24, we factor in divestments of Rs 500 billion."

In the fiscal year 2022-23, the government had a divestment target of Rs 650 billion. 

The report also said that the government would try to raise money by selling more shares of LIC, Shipping Corporation of India, and exiting holdings of Specified Undertaking of UTI. Kotak also pointed out that outright privatisation before general elections will be difficult, the report said. 

UTI is a vehicle for investing that holds shares of listed and unlisted companies formerly held by the failed Unit Trust of India. 

"The process of disinvestment and privatisation continues to be delayed, consequently increasing the burden on fiscal accounts," Morgan Stanley said. 

The financial services major also expects the government’s divestment receipt to be Rs350 billion this year.

Reuters report also quoted a note by an economist with the Bank of Baroda saying that the government has achieved or surpassed its disinvestment target only in eight of the 32 instances in the past. 

The process of divesting involves the government selling or liquidating its ownership in a PSU or subsidiary. When a PSU becomes a liability, the government often pursues disinvestment. The government receives non-tax money from divestments, and considerable inflows can assist close the fiscal deficit gap.