DAILY NEWS ANALYSIS

GS-III : Economic Issues Fiscal Policy

10 February, 2021
8 Min Read

Belated, but bold

Introduction

The government’s spending plans for 2021-22 hinge on better tax collections, and an ambitious plan to raise non-tax revenue.

Strategic Disinvestment Policy

Finance Minister has announced large-scale monetisation of government sector assets, including vast tracts of land, and is banking on disinvestment receipts of ?1.75-lakh crore.
This includes likely inflows from the strategic sale of entities such as Air India and BPCL, carried forward from this year’s plans.
The listing of LIC could be completed as well, with necessary amendments in the Finance Bill, and that alone could bolster the revenue kitty.
Most significant, however, is the new strategic disinvestment policy for public sector enterprises and the promise to privatise two public sector banks and a general insurance company in the year.
The policy, promised as part of the Atma Nirbhar Bharat package, states the government will exit all businesses in non-strategic sectors, with only a ‘bare minimum’ presence in four broad sectors.

These strategic sectors are —

atomic energy, space and defence;
transport and telecom;
power, petroleum, coal and other minerals; and
banking and financial services.

In India’s brief but tortuous history of disinvestment since it began listing PSUs on the stock markets through minority stake sales in the 1990s, this is undoubtedly the boldest stance yet.
Some, including Balco and Hindustan Zinc, where the government still has residual minority stakes, have fared much better under private management.
It can be no one’s case that India’s public sector remains at the ‘commanding heights of the economy.
Apart from raising precious revenues, the sale or closure of such firms will help the exchequer stop throwing good money after bad, and funnel it into more productive endeavours.

Way forward

The government will need to create confidence in the sale processes, ensure a semblance of fair valuations, give officers some cover from potential post-transaction witch-hunts by auditors and investigating agencies, sequence the sales so that the economy does not face shocks or create monopolies, and most of all, manage electoral pressures in jurisdictions where these units would be located.

Source: TH

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