With the recent budget announcement, one thing was immediately clarified that the government intends on heavily privatising the various public sector enterprises, reports suggests that the number of public sector enterprises will shrink to just around two dozen from over 300 at the moment.
Top government sources have informed TOI that the final number will be subject to Union Cabinet’s decision based on recommendations by the erudite think-tank NITI Aayog which has been tasked with identifying the next disinvestment opportunities. The budget further clarifies on this regard that there will be a maximum of four key strategic sectors and in these key segments a maximum of three to four public sector units. These key sectors have been identified by Finance Minister Nirmala Sithraman as atomic energy, space, defence, transport, telecom, power, petroleum, coal and minerals, banking, insurance and financial services as strategic sectors. Further nailing the government’s intention to reduce the number of CPSEs to a bare minimum.
However, with such bold policy decisions there are obvious criticisms. Right from mounting government debt to whether there is enough market interest for these PSUs to be taken over in the first place. To that extent, Disinvestment Secy. Shri. Tuhin Kanta Pandey has said that the government’s new disinvestment policy is aimed at economic growth and employment created rather than plugging the vast fiscal deficit.
This comes at a time when government spending and expenditure has surged in the middle of a global pandemic and economic meltdown leading to vast revenue shortages and massive fiscal deficit. However, the government pegged fiscal deficit for FY21 standing at 9.5% of GDP cannot be ignored. Top officials are on the contrary of the view that the government’s latest privatisation push completes the liberalisation reforms of 91′. The Secy. for Department of Investment and Public Asset Management had this to say:
Now in the new phase, government is prepared to cede control. normally, in government, people would not let the control go. so, there is a voluntary effort of the government where you let the control go.
The government has strategically manged this push now that investor sentiments are edging on the positive side unlike the sharp decline noticed during the COVID-19 peak in 2020 due to heavy market volatility. This was further confirmed by FM Nirmala Sitharaman’s announcement concerning the proposed privatisation of two state-run banks and one general insurance company.
To quantify, the governmenet’s disinvestment targer for the next fiscal year stands at INR 1.75 Lakh Crore and the target for the current one stands at INR 2.10 Lakh Crore while revenues collected through the disinvestments is only INR 19.499 Crore. This too raises many questions, will this make any practical impact on India’s endemic unemployment problem? Will it result in improvement in the service sector? Only time will answer.