India’s Finance Secretary Outlines Shift in Government’s Disinvestment Strategy

India’s Finance Secretary, T.V. Somanathan recently declared a shift in the governmental policy concerning disinvestment. The approach, previously considered a mere measure to balance the fiscal budget, is now being executed to invigorate Public Sector Undertakings (PSUs). The shift is ultimately due to the government’s belief in its own proficiency in revenue collection and expenditure regulation, according to our sources.

Sharpening PSUs’ Appeal to Shareholders

PSUs are undergoing an overhaul aimed at amplifying their appeal to shareholders. The primary goal is to heighten their valuation along with dividends, thereby minimizing the urgency for disinvestment. This tactic is deployed to maximize economic value, instead of strictly adhering to a disinvestment schedule.

Adopting a Holistic Evaluation Approach

Our sources indicate that a more encompassing strategy to appraise PSUs in terms of assets, profit potential, and growth viability is being adopted by the government. With this strategy, the Department of Investment and Public Asset Management (DIPAM) will focus primarily on concluding the ongoing privatization deals. A move towards this extended evaluation strategy ensures that the selling of stakes is strategically timed to obtain maximum benefits.

Disengaging Disinvestment From Fiscal Goals

The government has made it clear that disinvestment is being disengaged from fiscal targets to enable a better approximation of the economic worth of PSUs. According to DIPAM Secretary Tuhin Kanta Pandey, the government aims to raise ₹50,000 crore from other capital receipts, which encompass proceeds from disinvestment and the monetization of assets. While there are no specific businesses slated for Initial Public Offering (IPO) in the upcoming fiscal year, the market may see public issue offers from subsidiaries of listed Central Public Sector Enterprises (CPSEs).

Conclusion

The government’s willingness to recognize the economic potential of PSUs, and its desire to make use of it as a force for revitalization, is a welcome shift. As India enters a new era of financial management, the importance of utilizing PSUs to their full potential has never been clearer.