Even after the LIC IPO, Indian government may be well short of its divestment target — for a third year in a row
- With three months left until the end of the current financial year, the government has so far met only 5% of its divestment target.
- Till now, it has raised ₹9,329 crore out of ₹1.75 lakh crore divestment target of FY22.
- LIC IPO is expected to fetch somewhere between ₹75,000 crore to ₹1.50 lakh crore to the government depending on how much stake it decides to sell.
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AdvertisementThe union government might miss the divestment target for financial year 2022, which will be the third consecutive year where it fails to meet its ambitious numbers.
Every year, the government sets a target amount it hopes to earn by selling stake in public sector enterprises, receiving dividends from owned companies, amount realised from exchange traded funds and so on.
So far the government has only met merely 5% of its divestment target of ₹1.75 lakh crore and is short of ₹1.65 lakh crore more.
The government has huge hopes of meeting its huge disinvestment target from the LIC IPO where it is reportedly expected to sell 5-10% of its stake. However, even after selling stake in the IPO, it would still not meet its divestment target, here’s how.
Reportedly, the government is pushing for a valuation of ₹15 lakh crore for the state-owned insurer that will soon file for the country’s biggest IPO before March 2022.
|How much will govt get from LIC IPO||Funds govt would receive||Short of divestment target by…|
|If it sells 5% stake||₹75,000 crore||₹90,671 crore|
|If it sells 10% stake||₹1.50 lakh crore||₹15,671 crore|
So far the divestment proceeds of ₹9,329 crore came from the offer-for-sale of NMDC and the sale of some government-owned shares in Axis Bank.
In FY21, the government met 16% of its ambitious divestment target of ₹2.10 lakh crore due to unexpected pandemic that hit the country
|Government divestment so far from trimming stake in below companies||Approximately ₹9,329 crore|
|Axis Bank through Sutti||₹3,994 crore|
In the last 10 years, only twice has the government been able to meet and even exceed its divestment target.
In the February 2021 budget, Finance Minister Nirmala Sitharaman said the government would sell stake in Shipping Corp of India, Air India, Neelachal Ispat Nigam Ltd, Container Corp of India, IDBI Bank, BEML Ltd and Pawan Hans, among others.
|Year||Divestment target||% of target met|
|FY20||₹1.05 lakh crore||48%|
|FY21||₹2.10 lakh crore||16%|
Adding to it, the government was to privatise two state owned banks and sell stake in one insurance firm. The government is yet to sell stake in these public sector companies, and they seem unlikely before March 2022.
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