Govt Likely To Beat Fundraising Target Via State-Firm Stake Sales

The government is expecting to exceed the country's fiscal year target of raising around ₹80,000 crore ($8.4 billion) through stake sales in state-run firms and other asset monetisation methods, helping ease pressure on public finances strained by the West Asia conflict, according to a Reuters report.

The US-Israeli war on Iran has driven up fertiliser import costs and fuel subsidies, raising concerns that the government could miss its budget goals, a recurring pattern in India's divestment history.

Major Sales Driving The Numbers

This week, the Centre completed the sale of shares worth over ₹31,550 crore ($3.3 billion) in state-owned Life Insurance Corporation (LIC), its largest divestment in years. Combined with share sales in companies such as Coal India and Indian Railway Finance Corp, the government has raised more than $5.5 billion so far this fiscal year, the report said.

The long-delayed sale of the government's stake in IDBI Bank is also expected to conclude this fiscal year, potentially adding $2.5 billion to state coffers, the report added. Finance Minister Nirmala Sitharaman has reportedly set quarterly targets for the divestment department to boost stake-sale receipts.

India had launched an ambitious privatisation drive in 2021, but progress has been slower than planned, with only a few strategic sales completed. Officials have increasingly turned to selling smaller stakes in listed state-run companies, which are easier to execute and carry lower political and regulatory risk.

Fiscal Pressures In The Background

Rising oil import costs for the world's third-largest crude importer, have raised concerns about a widening fiscal deficit and current account gap.

The government is targeting a fiscal deficit of 4.3% of GDP this fiscal year, though a 37% jump in subsidy spending in the April-June quarter, compared with the same period last year, has led some analysts to question whether this target will be met.

Overall government expenditure for the quarter rose 11%, according to government data. Sitharaman said last month there were no immediate plans to revise budget estimates.

Dividends received by the government from the Reserve Bank of India, state-run banks and financial institutions have reached ₹3.24 lakh crore between April 1 and August 5, already surpassing the ₹3.16 lakh crore projected for the entire fiscal year.

The RBI alone contributed a record ₹2.87 lakh crore. The government expects non-financial state-run companies to contribute ₹75,000 crore in dividends this year, of which ₹2,550 crore has been received so far.

No major asset monetisation announcements, which can include land sales or infrastructure investment trusts, have been made yet, the report noted.