Meeting Rs 69,500-cr disinvestment target will be difficult: FM Arun Jaitley

NEW DELHI | MUMBAI: The global metal and commodity meltdown is emerging as a major deterrent for the government’s disinvestment target, with line ministries reluctant to sell stakes in PSUs like Nalco, Hindustan Copper, NMDC and Coal India.

Speaking at separate events, Finance Minister Arun Jaitley and his deputy Jayant Sinha admitted that meeting the Rs 69,500 crore disinvestment target for the fiscal year will be difficult, with both putting the blame on low commodity prices. This would, however, not impact the fiscal deficit target as collection of indirect tax revenue has been good, Jaitley said. “I don't think there are any concerns...I had consciously kept a very modest fiscal deficit target that is the movement from 4.1%, which eventually became 4% to 3.9%,” he said. “The manner in which tax revenues and expenditure are moving, I don't see there's going to be any difficulty.”

On disinvestment, the problem is that several of the key targets for stake sale are in the commodity sector. The meltdown in commodity prices has pulled down their stock prices drastically.

“I don't think it makes sense divesting at a time when prices are low,” Jaitley said.

“Whether it is Coal India or OMCs (oil marketing companies) … they are impacted by global commodity prices,” minister of state for finance Sinha said at an investment conference in Mumbai.

The Modi cabinet has already given its assent to stake sales in Nalco, NMDC, OIL, NTPC, BHEL and ONGC and the government is also keen on a further 10% sale from its stake in Coal India Ltd. So far, the Centre has managed to sell stakes in Power Finance Corp, Rural Electrification Corp, Indian Oil and Dredging Corp, raking in Rs 12,600 crore or a little over 18% of its 2015-16 target.

“While these are good running companies, we are not sure if disinvestment is advisable at this time. But the government has to take a broader view,” a top official dealing with some of the proposed stake sales in 2015-16 said, stressing that there is a similar reluctance about the timing of these stake sales expressed by line ministries such as mines, coal, power, petroleum and natural gas in their discussions with the Department of Disinvestment. Sinha said public sector firms like Coal India and oil marketing companies are impacted by global commodity prices.

“Obviously, we have to ensure that we get best possible valuation for these valuable enterprises,” he said, a day after news reports suggested that there is a proposal to halve the divestment target for this fiscal year.

The S&P BSE PSU index is 15% lower than a year ago, with several of the listed metal and mineral firms trading far lower than their peaks. Aluminium prices are at a six-year low, steel is in free fall and oil isn't where it used to be, said a senior official, suggesting that it may be better to hold on to the government's stake in such firms till the cycle turns. Meanwhile, Jaitly said the government is working on further easing foreign investment rules, essentially removing many conditions on foreign investment that were no longer relevant.