Government exceeds ₹80,000 crore FY19 disinvestment target

For the second year in a row, the government exceeded the disinvestment target of Rs.80,000 crore set for the current financial year, which ends in March, with completion of the acquisition of Rural Electrification Corporation by Power Finance Corporation for Rs.14,500 crore.

The public sector ETF was oversubscribed by about eight times against the base issue size of Rs.3,500 crore and the government decided to retain Rs.10,000 crore. The two transactions helped the government to exceed the target, which included 26 other deals.

“As against a target of Rs.80,000 crore for disinvestment for the current year, the divestment receipts have touched Rs.85,000 crore today,” finance minister Arun Jaitley said on Twitter. In December, the Union Cabinet had approved the strategic sale of REC’s 52.6% holding to PFC, along with the transfer of management control.

The government had set a target of raising Rs.80,000 crore from stake sales in state run companies for the current financial, lower than the Rs.1 lakh crore set for the previous year. The target has been achieved using a number of methods, including the PFC-REC transaction.

Earlier, officials had raised concerns about the ability to meet the target, given that the process slowed down in the middle of the financial year and the volatility in the stock market also had an impact on the planned follow-on offer.

“The acquisition would enable increased efficiencies in lending processes and policies across both the institutions and would create public value by offering better loan products to the power sector,” PFC said in a statement announcing the completion of the transaction to acquire REC’s holding.

“The convergence of the entities would help the power sector reap benefits from a de-centralised outreach of REC and a professional project finance expertise of PFC. Further, the ensuing diversification of assets of the group, as well as portfolio risk would help in resolution of stressed power sector assets of the group in a better and coordinated manner,” it said.

The ability to exceed the disinvestment target comes as a good news for the government struggling to meet the fiscal deficit target for the current fiscal year. Revenues from both direct and indirect taxes have been sluggish and disinvestment receipts will help plug some of that gap.

No comments: