New Delhi: The Narendra Modi government could miss the time frame set for privatisation of Air India, BPCL and Container Corp. of India Ltd (Concor), which was expected to be completed by March 2020, Mint said in a report Thursday.
This will create a deficit of Rs 40,000-50,000 crore in the budget, further weakening the government’s fiscal deficit target of 3.3 per cent of GDP, amid economic slowdown, the report said.
The government plans to sell 100 per cent ownership of Air India, disinvest its entire 53.29 per cent stake in BPCL, and sell 30.8 per cent of its out of 54.8 per cent stake in Concor. Only Rs 17,364 crore has been covered so far out of the Rs 1.05 trillion disinvestment target set for FY20.
“There is a lot of interest in the market among investors for the companies on offer. The transaction may also be completed successfully, but now it looks difficult that the money will reach the coffers before 31 March. That is a challenge,” the report quoted a finance ministry official as saying.
Prospective buyers may seek more time
The official said the prospective buyers might seek more time for due diligence, even though four to five weeks may be sufficient to respond to the Expression of Interest documents, which are under way.
“If it triggers an open offer for minority shareholders as per Sebi (Securities and Exchange Board of India) guidelines in the listed companies such as BPCL and Concor, again it will delay the process by another five to six weeks. Then the successful bidder will have to get clearance from the Competition Commission of India, only after which it will transfer the money to the government’s account,” said the official, who did not wish to be named.
“The government may still go ahead and show the expected disinvestment proceeds in the revised estimate of 2019-20 “to maintain the books,” he added.
On Tuesday, the International Monetary Fund (IMF) urged the government to handle its budgeting better and increase transparency in fiscal reporting.
“For example, a more accurate picture of the fiscal stance would better inform decisions regarding how much stimulus should be provided in a cyclical downturn. The government could increase its credibility vis-à-vis financial markets and enjoy more favourable borrowing conditions as a result. And greater fiscal transparency would also boost the ability of investors and citizens to make informed and efficient financial and economic decisions,” the IMF said in its Article IV consultation report.
According to IMF’s estimation, India might miss the fiscal deficit target by at least 50 basis points.
IMF Chief Economist Gita Gopinath said last week the lender will likely cut India’s growth forecast of 6.1% for the fiscal year through March. The central bank is projecting growth of 5% in the period.
Also read: Modi govt must learn from Vajpayee on how to generate wealth from disinvestment in PSUs
To this 50000 cr deficit just add on the money going down the drain to “revive” BSNL- just 69000 cr and get the true picture.
The IMF is telling India, Stop fudging your figures. It doesn’t work, when no one believes it to be true. 2. Missing a March 2020 deadline is no big deal if the underlying transaction holds promise. That is not the case with Air India. 3. What should not be done, simply to meet the disinvestment target, is to rope in poor LIC at five minutes to midnight.