#NotesForMrJaitley 10: reduce your expectations from disinvestment

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• The amount Jaitley hoped to raise through disinvestment in PSUs.

• This figure is 10 times more than what the government gives to the Ministry of Drinking Water and Sanitation.

• In India, there are a total of 290 central PSUs, as of January 2016. Of these, only 47 are listed on the Bombay Stock Exchange.

• According to the BSE, disinvestment 'typically refers to sale from the government, partly or fully, of a government-owned enterprise. A government organisation will disinvest an asset either as a strategic move for the company, or for raising resources to meet general/specific needs'.

• As per the government's 'disinvestment policy', reducing financial burden, improving public finances, and funding growth are a few of the objectives.

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• Government money that is locked up in PSUs.

• This amount is almost equal to the total estimated service tax that the government will collect in 2015-16.

• This is why disinvestment is of prime importance to combat the rising fiscal deficit, fund infrastructure projects, to pay off public debt and allocate money to important social sectors.

• Additionally, in the past few years, there have been increases in subsidies, plan expenditure and the defence budget as against incomes. Hence, disinvestment is a necessity.

• The share of increase in disinvestment earnings that Jaitley projected in his announcements during Budget 2015, as against the revised estimates of 2014-15.

• It is a daunting task, given India's track record. As per estimates, Rs 41,000 crore was expected from the sale of profitable PSUs, and Rs 28,500 crore from sick PSUs.

• In 2013-14, the estimate was Rs 55,814 crore, but only Rs 25,841 crore was realised.

• In 2014-15, the estimate was Rs 63,425 crore, but only Rs 31,350 crore was achieved.

• PSU disinvestment steadily increased from 2009-10 to 2010-11, and then plummeted in 2011-12. The total increase from 2009-10 to 2013-14 has been meagre 5%, and, so it was a risky bet to expect PSU disinvestment to increase by more than 100% this year.

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• The amount that has been earned till now through disinvestment in PSUs.

• Last week, the government decided to sell up to a 5% stake in the National Thermal Power Corporation, aiming to earn Rs 5,000 crore.

• The best-case scenario is that the government will achieve one-fourth of its target.

• According to various statements made by Jaitley and Minister of State, Finance, Jayant Sinha, this low achievement is essentially due to a fall in global commodity prices.

• According to Jaitley, the shortfall will not impact the fiscal deficit target.

• ASSOCHAM estimates that this year, the disinvestment target will be much lower.

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• The total fiscal deficit as of 2015-16.

• Disinvestment earnings will contribute little to bridging this gap between expenditure and receipt.

• Interest payments, net tax collection, subsidies and defence budget are other factors that affect the fiscal deficit.

• Options for Jaitley in this forthcoming budget are - reduce defence expenditure, increase tax collection or reduce non-plan expenditure further. Banking on PSU disinvestment doesn't make sense economically.