Deep Into Disinvestment
Published On : 27 Feb 2017
Article Category : Economics and Finance
Mantriji Content Manager
The Indian government’s 10% share in IOCL out of 68.57% was up for sale recently , with government expecting to raise approx. 9,000 crores out of it. This offer for sale forms part of the government’s disinvestment target of 69,500 crores for the current fiscal . So far government has raised 3,800 crores through three rounds of disinvestment processes which is still the far cry from the set target receipts. With everyone going gung ho about how tis 69,500 crores target is highly ambitious considering last year’s actual receipts 43,439 crores against a set target of 58,560 crores , and speculating if this would go unmet like last year. In my opinion the more pressing concern on which we should be raising questions is –is this trend of successive governments to rely on disinvestment money to meet revenue shortcomings year on year healthy?
Apparently,the issue getting ignored in all this is the fact that government has already eaten up the market capacity of about 3,800 crore(by disinvesting 10% of IOCL shares) in the current fiscal (with CIL, if released, expecting 23,000 crore). On one hand we are talking about “start up India , Stand up India” , and on the other hand we are crowding out private investments in disinvestment business which could have been used to absorb equity issues of upcoming business. The market’s appetite for other major business issues has definitely saddled with a top blue chip like IOCL out in the market. The money ,which if was available in the market could have been utilized for investments (read as drivers of growth in economy) ,is now getting eroded to meet consumption expenditure of government , to contain the shortfall (or rather ever ballooning shortfall) in revenue, and hence I would like to mention that I am like any other person around not against reigning in fiscal deficits but only concerned with the path being treaded to achieve it. We should not forget that government will always have welfare expenditures to meet but then trying to address it through a strategy as unsustainable as disinvestment needs reflection. Firstly, disinvestment can never be more than 49%, secondly with a limited number of PSU’s at hand this is not going to last for very long!
It's high time we adopt a redistributive approach to meet welfare expenditures i.e. taking from citizens (by augmenting there capacity to pay) and redistributing it amongst sections that need it more and utilize it in overall welfare of the country. Thus, our focus should be increasing revenue from taxes which is most crude and sustainable source of revenue in government’s hand. It is time we should go for radical taxation reforms, improving our tax lease , tax collections , curbing tax avoidance and stringently tackling the menace of tax evasions . with only 3.5 % of people paying taxes and taxes forming only 9.3 % of overall GDP. It is in our overall benefit to rethink our revenue augmenting strategies and address the long plaguing issues in our tax system.
Also, Government must rather try to make the PSU’s more efficient!
Tags : Deep Disinvestment