The coronavirus outbreak and crash of crude price have hit the disinvestment plan of the government that planned to raise about Rs 2.1 lakh crore in 2020-21. The sale of Bharat Petroleum Corporation (BPCL) is in trouble because of the crash of crude price, while it's tough to find a buyer for Air India, especially when the global aviation sector is in doldrums after the outbreak. The sale of Container Corporation of India (Concor) has additional problems as its major valuation comes from the leased land that it took from Indian Railways at subsidised rates. Besides, the stock market crash is not a good news for the government, which wanted to divest its 47 per cent stake in IDBI Bank and 10 per cent stake in Life Insurance Corp of India (LIC). Overall, the government wanted to sell stakes in two dozen central public sector companies in 2020-21.
Rating agency Fitch Solutions said that India's fiscal deficit in 2020-21 may skyrocket to 6.2 per cent of the GDP from 3.5 per cent that the government estimated. They expect that the revenue collection will contract in this financial year because of the weak economic activity. Fitch Solutions said the receipts may contract by 1 per cent from a growth of 11.8 per cent previously. Moody's slashed India GDP growth in 2020 to 2.5 per cent, while KPMG estimated below 3 per cent growth. Fitch quoted a 2 per cent GDP growth. Disinvestment is one of the major options to bridge budget deficits in this kind of economic scenario.
In the biggest privatisation drive ever, the union cabinet in November had approved sale of government's stake in BPCL, Shipping Corp of India (SCI) and on-land cargo mover Concor. Besides the privatisation, they decided to cut shareholding in select public sector firms to below 51 per cent to boost revenue collections that had been hit by the slowing economy. The government wanted to complete some of the sales in 2019-20 and achieve the disinvestment target of Rs 65,000 crore, which was revised downward following the delays.
Finance Ministry had earlier extended the deadline for bids submission in Air India to April 30 from March 17. The government wants to offload 100 per cent of its stake in the beleaguered airline. In BPCL, the interested parties can submit preliminary information memorandum by May 16 instead of April 4 earlier and the expression of interest (EoI) by 13 June instead of May 2. For the 52.98 per cent government stake in the oil refiner, only private companies with a net worth of more than $10 billion are eligible. The market valuation of BPCL has crashed around 35 per cent to Rs 68,750 crore in the last two months.
The Department of Investment and Public Asset Management (DIPAM) has appointed the asset valuer and transaction and legal advisors for the strategic sale of SCI stake. Concor's disinvestment process has hit the roadblock as it operates on the leased land of Indian Railways, valued Rs 16,500 crore. The government wants to sell the railway land to Concor at a subsidised rate, but the private container companies are objecting to the move.
"The major worry at this point of time is that no buyer will risk their balance sheets to go for the acquisitions. But the government urgently needs capital for the fiscal stimulus and the planned budget expenditure. If all the revenue sources like tax income and disinvestments go dry, handling the situation will be tough," said an economist with a corporate house.
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