Will central govt's privatisation push to mop up more revenues, go as planned?

In the Union Budget for 2021-22, Finance Minister Nirmala Sitharaman has set steep targets when it comes to the fiscal deficit and capital expenditure. On the fiscal deficit front, the target is to bring it steeply down to 6.8 per cent of the GDP in the next financial year. That's a big target as the fiscal deficit in the current fiscal is expected to zoom to a staggering 9.5 per cent. Thefiscal deficit at 4.6 per cent was less than half of that in FY20. To fuel growth through a higher spend on infrastructure, the Finance Minister increased the allocation for capital expenditure by 34.5 per cent to Rs 5.5 lakh crore from Rs 4.12 lakh crore in the last Budget. Increasing capital expenditure while containing the fiscal deficit is a daunting task.

So, how will the central government achieve these diametrically-opposite goals? The answer to this is very simple. It plans to embark on a disinvestment spree. That means selling public sector units (PSUs) in large numbers. So, the disinvestment target for FY22 has been set at Rs 1.75 lakh crore. The disinvestment target for the current fiscal year was much higher at Rs 2.1 lakh crore. But the Covid crisis threw a spanner into its ambitious plans and as consequence, the Centre could mop up a measly Rs 19,499 crore to date.

But the central government seems to be serious about the next year's target. It already indicated that it shortlisted four banks for privatisation and two of them would be sold in FY22 itself. The names of Bank of Maharashtra, Bank of India, Indian Overseas Bank, and the Central Bank of India are doing the rounds, but there is no clarity yet on which two will be sold first. The strategic sale of IDBI Bank, BPCL, Shipping Corporation of India, Neelachal Ispat Nigam and RINL is also on the divestment menu. But it is not going to be easy for the central government to take its disinvestment plans ahead.

There is a lot of opposition for the privatisation of RINL which operates Visakhapatnam Steel Plant. Political parties including the ruling YSRCP are against the privatisation. Trade unions will obviously not allow the Centre's move to privatise RINL. The Centre will encounter similar challenges for every privatisation attempt it makes. Bank unions also organised countrywide protests on Friday, opposing the privatisation of public sector banks. They are likely to intensify their agitation including a protest march to Parliament next month. It's very likely that the Centre will have a cakewalk on the privatisation front. The billion-dollar question is how the Centre will achieve its steep targets on the fiscal deficit and Capex fronts if it fails to reach the divestment goal in FY22.