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Why Modi govt’s modest Rs 65,000 crore disinvestment target for FY23 seems to be a tall order

Government has already met one-third of its Rs 65,000-cr disinvestment target for this year. But legal and procedural delays with high-value companies are now posing hurdles.

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New Delhi: Union Finance Minister Nirmala Sitharaman kept the subject of disinvestment out of her last Budget speech, but in effect there really wasn’t that much to speak about. Budget documents show that the government has pegged its disinvestment target for FY 2022-23 at a modest Rs 65,000 crore — a sharp reduction from last year’s target of Rs 1.75 lakh crore.

With the Life Insurance Corporation (LIC) initial public offering (IPO) fetching the government Rs 20,560 crore, the total disinvestment receipts stand at Rs 23,575 crore, according to the website of the Department of Investment and Public Asset Management (DIPAM), a wing of the Union Finance Ministry.

This means that more than one-third of this year’s disinvestment target has already been met.

However, the jury is still out on whether the government will be able to achieve the rest of its modest target, given the legal or procedural delays surrounding high-value companies listed for disinvestment this year, including Central Electronics, Pawan Hans, Shipping Corporation of India (SCI), Bharat Earth Movers (BEML), Container Corporation of India (CONCOR), and Bharat Petroleum Corporation Ltd (BPCL). 

“Incrementally, it looks difficult that any privatisation of a PSU can take place in the first half of the current financial year. If at all, any potential stake sale could only see light in the second half of the year,” Siddharth Kothari, an economist at Sunidhi Securities, said.

Top officials in the Ministry of Finance, meanwhile, indicate that the focus will now be on ensuring the sale of IDBI Bank, where the government holds 45.48 per cent stake and LIC holds 49.24 per cent. Together, their stake is worth Rs 40,000 crore.

ThePrint looks at all these state-owned companies and how problems related to them seem to have choked the government’s disinvestment pipeline.

Also Read: Rs 13,561 crore — what Modi govt got from disinvestment in 2021-22, just 8% of original target


With the government’s stake in Bharat Petroleum Corporation Ltd. valued at Rs 41,000 crore, this is by far the largest among state-owned companies listed for disinvestment this year.

By the time the process of Bharat Petroleum’s privatisation — which began in 2020 — reached its final stage, there was only one bidder left in the race. “The process will have to be restarted as at the time of financial bids, there were no competitive bids,” a DIPAM official said.

As reported earlier by ThePrint, a combination of factors has been driving investors away from one of India’s biggest oil marketing companies. Among these factors is the fear that oil marketing companies do not enjoy absolute freedom in terms of fuel pricing and the global push towards renewable energy.

The privatisation of the Container Corporation of India, on the other hand, has been stalled for the last couple of years. This is largely owing to the delay on the part of the government in finalising a policy for use of land owned by CONCOR around railway stations.

According to reports, land license fee may be slashed from 6 per cent to 3.5 per cent to facilitate the strategic disinvestment of CONCOR, which could fetch the government another Rs 8,000 crore. But, the process itself can take time.


The government has plans to dilute the entirety of its 64 per cent stake in the Shipping Corporation of India for Rs 4,000 crore, for which it is now undertaking a de-merger of the SCI’s real-estate assets in Maharashtra — a process that could take at least four-six months, according to the DIPAM official.

The Maharashtra state government, for instance, had expressed reservations over the transfer of one such asset to a private player, citing security concerns since the property — Shipping House — is located opposite Chief Minister Uddhav Thackeray’s office.

In the case of Bharat Earth Movers Ltd, a separate entity— BEML Land Assets — has been carved out from it, which includes BEML’s non-core assets. The de-merged entity will need approvals from the state governments of Karnataka and West Bengal for the transfer of some of these assets.

The Government of India has proposed to dilute 26 per cent of its stake in BEML for Rs 1,400 crore, along with transfer of management control.

According to sources in DIPAM, the de-merger process is likely to cause a delay in the strategic disinvestment of SCI and BEML.

Central Electronics 

Last November, the government had announced its decision to sell all of its stake in solar products manufacturer Central Electronics, which comes under the Department of Scientific and Industrial Research, to Nandal Finance and Leasing — a financial services provider — for a sum of Rs 210 crore.

However, the disinvestment was held up after the employees’ union of Central Electronics moved the Delhi High Court against the valuation at which the company was sold. Among key contentions put forward by the union was that the winning bidder did not have any prior experience with the manufacture of solar products.

With the matter now in court, the government has also formed an inter-ministerial group to examine the union’s concerns.

Pawan Hans

Also in the disinvestment pipeline this year is helicopter maker and aero-mobility services provider Pawan Hans, which was sold to Star9 Mobility Private Ltd in April this year for Rs 211 crore after three unsuccessful attempts at privatisation.

Star9 Mobility Private Ltd is a consortium of three companies, namely Big Charter Private Limited, Maharaja Aviation Private Limited, and Almas Global Opportunity Fund, which is the financing arm of the consortium.

The National Company Law Tribunal (NCLT) had pulled up Almas Global in April for failing to fulfill its obligations despite winning a bid for EMC Ltd, a company undergoing insolvency proceedings.

“There are many issues relating to one company as these are big companies. The NCLT order has come to us and we are studying it. We will make a final decision soon on the letter of award for the winning bidder,” a government official told ThePrint on condition of anonymity.

According to the rules of privatisation, a company that fails to meet its financial commitments faces disqualification.

“Almas Global continues to have firm commitment to acquire EMC Ltd as per resolution plan approved by NCLT even under such market uncertainties and that is the reason the Fund did not exercise the provision of triggering the force majeure clause, which is there in the approved resolution plan, as such clause applies for such situations only,” Almas Global said in a statement.

Media reports Monday pointed out that the government had decided to put the privatisation of Pawan Hans on hold.

Focus now on sale of IDBI Bank, reforms

DIPAM officials ThePrint spoke to said that the approach for the department will now be not only to sell government stake in companies so that it gets the desired receipts, but also to introduce reforms. These, it is hoped, will serve the interests of companies, shareholders, and long-term investors.

“If you see what we have done with LIC, it now has a professionally managed board, there is a new chief financial officer, and the company has moved to latest software to better identify products and strategies with changing times in terms of policies,” the DIPAM official quoted earlier said.

A similar attempt will also be made while selling the stake in IDBI Bank, the official added.

“Our focus now is to bring out the expression of interest (EOI) for IDBI Bank. The roadshows for the stake sale are ongoing. This too would be a big issue for privatisation as this has not happened for a bank yet,” the official told ThePrint.

The government is also in talks with LIC to discuss the amount of stake both entities will offload in the strategic disinvestment of IDBI Bank to hand over control of the management, the official said, adding that DIPAM is holding pre-EoI roadshows to gauge investors’ interest.

(Edited by Amrtansh Arora)

Also Read: Modi govt vs CBI in SC: Here’s why govt has questioned probe in Hindustan Zinc divestment


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