India set to miss divestment targets by more than half this year - sources

NMDC Steel

24/11/2023 05:19

By Nikunj Ohri
       NEW DELHI, Nov 24 (Reuters) - India will struggle to
raise even half the proceeds it had targeted from planned sales
of state-run firms this year and will miss divestment targets
for the fifth straight year, sources said, as elections shift
government priorities.
    The government may fall short of its divestment goal by 300
billion rupees ($3.60 billion) in 2023/24, two government
sources told Reuters. New Delhi had targeted 510 billion rupees
from divestment proceeds for the current fiscal year that ends
March, 2024.
    In 2023/24, about 300 billion of the 510 billion rupees
target was expected through stake sales in IDBI Bank  IDBI.NS 
and the privatisation of state-owned NMDC Steel  NMDS.NS .
    However, delays in vetting of interested buyers for IDBI by
the Reserve Bank of India, the banking regulator, have stretched
the sale timeline beyond the 2024 federal elections.
    The sale of NMDC Steel will not conclude this year due to
state elections and federal elections next summer. The company's
main plant is in the mineral rich state of Chhattisgarh, where
it is a major employer and unions have protested the sale.
        While it may still achieve some smaller divestments in
the current fiscal year, it would still be well short of half
its overall target.
    Prime Minister Narendra Modi's government has not been able
to follow through with plans to sell companies in a slew of
sectors including steel, fertiliser and oil and gas since 2019,
hampered by issues such as land ownership and union opposition.
    The finance ministry did not immediately respond to requests
for comment.
        "No privatisation will take place in this tenure of the
government," said Subhash Chandra Garg, former federal finance
secretary. "Forget divestment and privatisation for next six
months because of lack of political interest in privatisation
policy."
        So far this year, the government has received 80 billion
rupees through stake sales, according to government data. Some
of the shortfall in the current year's target would be offset by
higher dividends paid by state-run firms to the government, the
first source said.
        Strong profits and steady demand have allowed these
firms to give higher dividends.
    The government expects to surpass its 430 billion rupees
dividend target and has so far received 203 billion rupees from
state-run firms.
    "As long as the government is meeting its fiscal targets and
there isn't a shortfall, missing divestment targets is fine,"
said Rahul Bajoria, an economist at Barclays Investment Bank.
    The privatisation delays will not impact the government’s
fiscal deficit target of 5.9% of GDP, a third government
official said.
    The government has only managed to sell minority stakes in
five of its companies through so-called offer for sales via
stock exchanges, despite Indian markets hitting record highs
this year. An index of state-owned entities touched an all-time
high of 13,242 on Nov. 16.

    ($1 = 83.2440 Indian rupees)

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
India set to miss divestment target for the fifth year in a row 
  https://tmsnrt.rs/46rSV0k
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Nikunj Ohri. Editing by Sam Holmes)
 ((nikunj.ohri@thomsonreuters.com; +91 90284 60730; Reuters
Messaging: twitter.com/nikunj_ohri))