The Union Budget 2022 focuses on long-term growth and avoids aggressive divestment of government assets to revive the Indian economy. The government has projected a divestment target of Rs 65,000 crore in the Budget and estimated capital expenditure at Rs 39,44,909 crore. What will be the impact of the Union Budget 2022 on divestment roadmap for FY 2022-23 and how does the government plan to achieve its targets? Let’s find out.

Revision of divestment target for FY 2022
The government has estimated the fiscal deficit for FY 2022 at 6.9% of the GDP. The previous Union Budget had projected a divestment target of Rs 1,75,000 crore for budget year 2022. However, with the privatisation of Air India, Neelachal Ispat Nigam Limited and other Central Public Sector Enterprises (CPSEs), the government has only been able to raise Rs 12,030 crore. 

Hence, in the Union Budget 2022-23, Finance Minister Nirmala Sitharaman has revised the divestment target for the fiscal year 2022 to Rs 78,000 crore. The revised divestment target for FY 2022 is quite achievable, as the initial public offer of the Life Insurance Company (LIC) is due this year. The government expects to raise a minimum of around Rs 66,000 crore (as opposed to the previously estimated evaluation of Rs 1 lakh crore) from the IPO. 

Divestment roadmap for FY 2023
The government has estimated fiscal deficit for FY 2023 at 6.4% of the GDP. For the next budget year, 2023, the government has projected a divestment target of Rs 65,000 crore, which is much lower than the divestment estimates of the previous years. 

The divestment target of Rs 65,000 crore is quite achievable as the government plans to divest Bharat Petroleum Corporation (BPCL) and Shipping Corporation of India (SCI) in the next year. Furthermore, the government had previously announced the privatisation of IDBI bank. However, the sale of the government-backed bank has yet to gain momentum. Pawan Hans has also been put up for sale by the government and has already received bids. However, the government is still in the initial stages of selling public sectors companies such as Rashtriya Ispat Nigam (RINL).

In the National Monetisation Pipeline (NMP) that was unveiled by the government in 2021, road, railway, and energy assets comprise 66% of the total assets that are to be monetised. Additionally, the government plans to monetise assets from sectors such as mining, warehousing, telecom, natural gas, and petroleum product pipelines. Several assets listed in the NMP are yet to be divested and many investors expect their sale to be rolled out in the fiscal years 2022 and 2023.

Lingering effects of the pandemic 
The pandemic has affected the pace of divestment, put the brakes on privatisation of public sector banks and dampened GDP growth. The Banking Laws (Amendment) Bill, which envisaged the privatisation of two public sector banks and was listed for introduction in Parliament last year, has still not been tabled. 

Want to know more about key highlights of the Union Budget 2022? Click here. 

*The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.