The government can justifiably feel a sense of relief at the success of the recent round of Coal India Limited (CIL) disinvestment which has brought in some much-needed funds to its anaemic coffers. In what was the biggest equity offering ever in the country, the offer for sale of 10 per cent of its stake in CIL fetched the government a whopping Rs.24,557 crore, more than half of the budgeted proceeds of Rs.43,425 crore from disinvestment this fiscal year. To put the CIL sale in perspective, the government had managed to raise just Rs.1,719 crore until now in this fiscal through the sale of shares in Steel Authority of India. If the government is to keep its promise of keeping the fiscal deficit at 4.1 per cent of GDP in 2014-15, achieving the budgeted revenues from disinvestment is crucial. The budgeted fiscal deficit for the entire year was exceeded in the first nine months until December 2014 since tax revenues did not grow at the expected pace. The government will also have to look at non-tax revenues such as from disinvestment to fill the fiscal hole. Hence the spectrum auction, coming up in March, and the disinvestment in other PSUs such as ONGC and NHPC, assume great importance.
The CIL disinvestment may not have been so successful but for some generous help from domestic institutional investors, particularly insurance companies. As much as Rs.11,360 crore, which is half of the total sum raised, came from insurance companies led by the LIC, with the latter accounting for a bulk of the applications in this category. Of course, the LIC may have seen genuine promise in CIL while investing its money. Yet, this is nothing more than money moving from one hand of the government to the other given that the LIC is wholly owned by the Centre. Of course, foreign institutional investors (FIIs) have also put in Rs.5,919 crore in the CIL offer, which is encouraging. The government would do well to reappraise the entire disinvestment programme which has so far, disappointingly, amounted to nothing more than selling off a few pieces of family silver to tide over difficult times. What is required is a privatisation programme whose objective will not merely be to raise funds for the exchequer but to reform the public sector space. The government should identify public sector units that are languishing for want of capital and technology and bring in strategic private partners to rejuvenate them. The trade unions too will be on board to support such schemes that will safeguard jobs in these companies. Eventually, the Central government should divest itself of enterprises in sectors such as steel and cement production, focussing instead on improving social services such as health care and education.
