New Delhi: Days after the Union Budget was presented in February this year, Prime Minister Narendra Modi declared that “the government has no business to do business”.
“its [government’s] The task is to think of food for the poor, to build houses and toilets for them, to provide them clean drinking water, to provide them health facilities, to build roads, to think of small farmers. It’s my priority,” he added ANI in one Interview,
While the second part of his statement on what the government should focus on is a work in progress, disinvestment data from the past three decades shows that his commitment to putting the government out of business is not empty talk.
The Modi government’s thrust on disinvestment means that its share is 72 per cent (Rs 4.48 lakh crore)., What has been earned from disinvestment since the process first started in 1991, found an analysis by ThePrint.
Uses data from ThePrint’s analysis of disinvestment Reserve Bank of India (RBI) and from the Department of Investment and Public Asset Management (DIPAM) for full income per annum.
Since the analysis of absolute numbers does not take into account inflation recorded over the past three decades, the analysis assumes an average annual inflation rate of 6 percent between 1991 and 2022. Once this is included, the data shows that a still significant 57 percent of all disinvestment proceeds was earned after 2014.
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‘minimal government’
Disinvestment of government stake in public sector companies was first mentioned in the interim budget of 1991-92 by the then Finance Minister Yashwant Sinha, after which it was taken up in the full budget of that year. Presented by his successor Manmohan Singh.
In subsequent years, pressure from coalition politics hindered the pace of government action on the disinvestment front, earning only Rs 17,557 crore (about Rs 91,800 crore in today’s terms) through this route in the eight years between 1991 and 1999. Went.
In contrast, the Vajpayee government attempted to accelerate disinvestment during its tenure, earning Rs 27,599 crore (about Rs 93,300 crore today) in just five years (1999-2004).
The first term of the Congress-led United Progressive Alliance (UPA) government (2004 to 2009) hinged on the support of the Left, which have historically opposed disinvestment plans. As a result, the disinvestment proceeds during this period were only Rs 11,591 crore, which is about Rs 32,000 crore in today’s value.
In UPA-II (2009–14), the Congress was in a much stronger position in the alliance, which allowed it to take more decisive steps on disinvestment. In this period, the government earned a strong over Rs 1.2 lakh crore (Rs 2.4 lakh crore today) in just five years.
Overall, the UPA disinvested Rs 1.32 lakh crore in its 10 years in power – which is equivalent to Rs 2.74 lakh crore in today’s terms.
But it was only in 2014 that the government’s disinvestment drive really gained momentum. At least until the Covid pandemic has significantly derailed progress.
In the first term (2014-19) of the Modi government, the total earnings from disinvestment was Rs 3.2 lakh crore, which will be Rs 4.7 lakh crore today. The three-and-a-half years till September, including the two pandemic years of Modi 2.0, have seen a total disinvestment income of Rs 1.26 lakh crore or an adjusted Rs 1.48 lakh crore so far.
While the Modi government has been keen on disinvestment from the beginning, the pandemic encouraged it to codify its strategy.
As part of May 2020 Atmanirbhar Bharat Package With an aim to stabilize the lockdown-hit economy, Union Finance Minister Nirmala Sitharaman announced a public sector enterprise policy to encourage more private sector participation while reducing the government’s role in business.
In the following budget, the Finance Minister elaborated on this announcement and provided Policy Framework, As per the new strategy, the government will maintain a “minimal” presence in the strategic sectors of (i) nuclear power, space and defence, (ii) transport and telecommunications, (iii) power, petroleum, coal and other minerals, and (iv) banking. , insurance and financial services. In non-strategic sectors, public sector enterprises will either be privatized or closed down.
Perhaps this is why the government’s strategy can be best expressed with Modi’s strategy. Statement That “the government has no business to do business with”.
policy and revenue
The data shows that disinvestment, though significant under the Modi government, accounts for a small fraction of the government’s other revenue sources such as income tax, corporate tax and goods and services tax (GST).
Then why is disinvestment given so much importance? The answer to that question is twofold.
Firstly, despite the relatively low revenue from disinvestment, it still serves a specific purpose, according to Ranan Banerjee, government sector leader at PwC India. “The disinvestment is a very small amount as compared to the overall budget, but still, it is not negligible,” Banerjee explained.
He told ThePrint: “If in the past the total fiscal deficit was in the range of Rs 10-12 lakh crore, and if you budget for disinvestment of around Rs 1 lakh crore, it is still a significant part of the total deficit numbers. Is. So, if we are budgeting for a fiscal deficit of 4 per cent, effectively a budget of 30-40 basis points has to be financed from disinvestment.
Second, disinvestment serves as an important policy tool to open up markets to the private sector in certain sectors, while also ensuring that the government gets the right price for its assets, noted economist Rishi Shah. “they [disinvestments] One needs to look at it from a strategic perspective rather than a sustainable revenue stream,” he told ThePrint.
“The fiscal authorities are trying to bring stability and predictability in the revenue streams and accordingly, the focus is on ensuring buoyancy in direct and indirect tax revenues and increasing efforts in those areas.”
disinvestment target
For the current fiscal, the government has budgeted Rs 65,000 crore as its disinvestment target. This is more conservative than the previous years’ targets – Rs 2.1 lakh crore in 2020-21 and Rs 1.75 lakh crore in 2021-22.
So far, it has met only Rs 24,544 crore or 38 per cent of this year’s target though upcoming deals such as disinvestment IDBI Bank And Container Corporation of India can bring you closer to the target.
“If the government wants, it should be able to meet this year’s disinvestment target as there are small PSUs [public sector undertakings] Those are ready for disinvestment and the market is also catching up,” Banerjee said. “The government also wants to get the right pricing for disinvestment.”
He said the more important question is whether the government needs to proceed from disinvestment this year, given the strong tax revenue so far and the government’s control over its spending.
“If tax revenue continues to bounce and revenue expenditure remains under control, and keeping in view the possibility of expenditure on MSP [minimum selling price] Because the current market rates are now higher than the MSP, despite the hike, there may be a situation where the government will not require additional revenue to reach its fiscal deficit target. It may plan to keep those incomes for the next financial year,” explained Banerjee.
(Edited by Amritansh Arora)