Disinvestment target raised

With tax revenue growth remaining tepid, the Centre has relied more on non-tax revenues, including divestment, to reduce fiscal deficit to 3.3% of gross domestic product (GDP) in 2019-20. Finance minister Nirmala Sitharaman, in her maiden budget, increased the divestment target from Rs 90,000 crore to Rs 1.05 trillion for the current fiscal year, focusing on consolidation of public sector undertakings and strategic disinvestment.

Sitharaman said the government will explore options to bring down its stake below 51% in certain public sector units. “The government has also decided to modify the existing policy of retaining a 51% stake, inclusive of the stake of government-controlled institutions,” she said.

Industry lobby group Ficci said the government’s decision to consider divesting its stake in select public sector units to below 51% was interesting and it looks forward to the details.

The Centre, which failed to sell a majority stake in debt-ridden Air India earlier, will take another shot at selling the airline this fiscal.

“Strategic disinvestment of select CPSEs will continue to remain a priority for this government. The government would not only re-initiate the process of strategic disinvestment of Air India, but would offer more CPSEs for strategic participation by the private sector,” the finance minister said.

It has also proposed that the concessional rate of short-term capital gains tax will also apply to fund of funds set up for disinvestment of central public sector enterprises, to which concessional rate of long-term capital gains tax has already been extended.

Sitharaman said the government will take necessary steps to meet public shareholding norms of 25% for all listed public sector undertakings and raise the foreign shareholding limits to maximum permissible sectoral limits for all public sector undertakings, which are part of the emerging market index.

PSUs may have to further dilute their stake as Sitharaman said she has asked Sebi to consider raising the current threshold of 25% public shareholding to 35%.