Budget RE discounts proceeds from LIC IPO

The Centre has not accounted for proceeds from the initial public offering (IPO) of Life Insurance Corporation (LIC) in its revised budget estimates.

Officials said though the attempt is to complete the listing in this financial year, the process could spill over to the first quarter of the next fiscal.

If the listing is completed within this fiscal, then it can be reflected in the actuals with the final accounts for the year, they said.


The Department of Investment and Public Asset Management (DIPAM) recently clarified that the plan is on course for the LIC IPO in the last quarter of this fiscal.

"It would be wrong to conclude that the LIC IPO will not happen. But given the quantum of IPO and close deadline, it may stretch beyond March 31," a finance ministry official told ET on condition of anonymity.

The department is closely working with the Securities and Exchange Board of India (SEBI) and merchandise banks appointed for the purpose.

For this fiscal, the Centre has budgeted ₹1.75 lakh crore from disinvestment in public sector firms and financial institutions, including two public sector banks, one insurance company, BPCL, Shipping Corporation of India, Air India, IDBI Bank and LIC IPO.

Of this, the government has managed to garner less than ₹10,000 crore, including Air India sale.

While the disinvestment in Neelachal Ispat Nigam Ltd is in its final stage, share sales in Shipping Corporation of India and BPCL are delayed, and the government is going slow on the privatisation of two public sector banks and one insurance company. The disinvestment in IDBI Bank appears to be linked to the LIC IPO, which is the majority shareholder in the bank.

Last year, the Centre was able to mop up only ₹32,000 crore against a budget target of ₹2.1 lakh crore owing to the second wave of the Covid-19 pandemic.

Impact of Fiscal Deficit

Finance ministry officials, however, maintained that lower divestment proceeds will not upset the fiscal maths and said the deficit will stay "closer" to the target.

They attributed this to the healthy growth in both direct and indirect tax collections, which are set to exceed the budget target considerably.