In the last July, Finance Minister Nirmala Sitharaman, while presenting the general budget, had said that the country will make $ 5 trillion economy in the next five years. The government is continuously taking decisions to achieve this goal. For example, a Task Force Committee was formed to increase foreign investment, while a number of major decisions including cuts in corporate tax were taken to lure domestic investors.
Under this, now the disinvestment of government companies has been approved. Explain here that the disinvestment process is the reverse of investment. Under the disinvestment process, the government reduces or sells its stake in a public sector company. The purpose of government disinvestment is to withdraw the money.
Why is the government insisting on disinvestment?
The central government is trying to accelerate the economy through disinvestment. Statistics show that the GDP growth of the country is slow. Other economic data, including the Index of Industrial Production (IIP), are also disappointing. Similarly, efforts to reduce the fiscal deficit or to achieve the goal of tax collection are also not working.
Fear of increasing fiscal deficit
The central government wants to control the fiscal deficit at 3.3 per cent of GDP, but Fitch Solutions says that the fiscal deficit could remain at 3.6 per cent in the current financial year. On September 20, the government has reduced the rate of corporate tax for domestic companies from 30 percent to 22 percent. The move is expected to cause a revenue loss of Rs 1.45 lakh crore to the government during 2019-20. That is why the possibility of increasing fiscal deficit is being expressed.
Reduction in Tax Collection
In the current financial year (1 April 2019 to 31 March 2020), the government has suffered a major setback on the tax collection front. Actually, the government's direct tax collection has so far been Rs 6 lakh crore. At the same time, the government has set a target of tax collection of about Rs 13.5 lakh crore in this financial year. In such a situation, the government will have to raise about 7.5 lakh crore rupees in the next 4 months to achieve the target. Obviously, this goal is not easy. Similarly, the GST collection is also decreasing every month and it is still running below the government's target.
What is the goal of revenue from disinvestment?
In the general budget, the government had set a target of achieving Rs 1.05 lakh crore from disinvestment in the current financial year. Earlier in February, while presenting the interim budget, Piyush Goyal had said that the target of raising Rs 90,000 crore from disinvestment has been set in the financial year (2019-20). This was Rs 10,000 crore more than the target of 80,000 crore set for disinvestment in 2018-19. Let us know here that in 2018-19, the government had achieved its target through disinvestment.
The government has so far received close to Rs 15,000 crore from disinvestment in the current financial year. This includes Rs 637.97 crore received from the IPO of IRCTC. Explain that after the IPO, the government's stake in IRCTC has come down to 87.4. Earlier, the government had 100 percent stake in this company. This means that the government's 12.6 per cent stake in IRCTC has decreased.
Government's new decision
The government now has Bharat Petroleum Corporation Ltd. (BPCL), the shipping company Shipping Corporation of India (SCI) and the freight container container corporation of India (CONCAR) have approved the sale of government stake. In addition, the government Tehri Hydro Development Corporation (THDC), and the North Eastern Electric Power Corporation Ltd. (NEEPCO) holds its stake in Public Sector NTPC Ltd.
At the same time, the government has approved bringing down the stake in selected public sector companies, including Indian Oil Corporation (IOC), to below 51 percent. In such a situation, it is now expected that the government will achieve its disinvestment target. In fact, with the sale of BPCL alone, the government will get about 60 percent of the disinvestment target. At the same time, the government is expected to get a large amount even if the participation in IOC is reduced. This is to say that the government has reached its disinvestment target in one stroke with this decision.
However, the government is still insisting on the sale of government companies like Air India and Pawan Hans. The government is in favor of selling 100 per cent stake in these companies. However, despite many efforts, the government has not been able to get success right now. Let us know that during the budget session, Minister Arvind Ganpat Samvat informed the Parliament about the companies whose government has approved the principle disinvestment. These are 28 companies in total. Apart from this, a total of 19 companies were also told by the Ministry that the government has approved the closure.