Budget: In historic divestment move, Govt may transfer PSU stakes to new corporate entity

In what may come as a historic decision in terms of the Centre's disinvestment plan, sources have told Republic TV that the Centre plans to corporatise disinvestment in Union Budget 2020.

In a sensational development, the Union Cabinet has 'in-principle' approved disinvestment in various CPSEs (Central Public Sector Enterprises) and these will be taken up aggressively to facilitate the creation of fiscal space and improve the efficient allocation of public resources. Finance Minister Nirmala Sitharaman is expected to roll out her disinvestment plan later on Saturday, including the announcement of a separate company.

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Corporatised disinvestment

GOV TO TRANSFER IT'S STAKE IN ALL LISTED PSUS TO A SEPARATE CORPORATE ENTITY MANAGED BY AN INDEPENDENT BOARD OF PROFESSIONALS

What this means is that the government may set up a separate corporate entity to which it will transfer its stake in all PSUs - any such company is likely to immediately become the biggest in India. Then this independent, professional driven board will take care of all the disinvestment process, essentially disengaging it from the bureaucracy of the Finance Ministry. The government will transfer its stakes in all listed PSUs to this new corporation so that it is strategically managed by experts independent in decision making and execution.

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Why this may be important?

According to Jeetu Panjabi, a global market strategist, the government has huge stakes in big companies and national assets like highways which can very well be put on sale systematically to fill public coffers to spend elsewhere. "There are a lot of corporate funds who would be interested in buying and operating assets like highways and ports. The good news is that you can put USD50-60 billion of these assets on the block and that would be a great source of funding for all the investment programs in sectors like infrastructure," he says.

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Union Budget 2020

This year's Budget assumes tremendous significance as the Indian economy is facing multiple challenges such as a rise in inflation, unemployment, farmer distress and a dip in GDP growth. The government has taken inputs from multiple stakeholders. Sitharaman has also announced a series of reform measures in the last few months to give a boost to the economy.

In the Economic Survey 2019-20 tabled on the floor of the Parliament on Friday, the GDP growth for the next fiscal year has been pegged at 6-6.5%. This is much more than the IMF estimate. The Union Finance Minister will present the Union Budget at 11 am on Saturday. 

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