Vital Stats

Disinvestment in India
On October 8, 2021, the Cabinet Committee on Economic Affairs approved the bid placed by Tata Sons Private
Limited to acquire the government’s entire stake in Air India. The transaction is expected to be completed by
December 2021. In the Union Budget for 2021-22, the central government pegged the receipts from disinvestment
at Rs 1.75 lakh crore. In the Budget speech, Finance Minister Nirmala Sitharaman announced that the government
will complete the disinvestment of Air India, Bharat Petroleum Corporation Limited, and IDBI Bank in 2021-22. In
light of this, we look at the trends in disinvestment receipts of the central government over the years.
While disinvestment targets have become aggressive, actual receipts have fallen short of the targets
Disinvestment targets vs receipts (2010-20) ▪ Since 2010, barring two years (2017-18 and 2018-
Budget Percentage 19), the central government’s actual receipts from
Actuals
Year Estimate of estimate disinvestment have consistently fallen short of the
(in Rs crore) realised
(in Rs crore) budget estimate. In 2017-18, 37% of the
disinvestment receipts were raised from the
2010-11 40,000 22,846 57%
strategic disinvestment of Hindustan Petroleum
2011-12 40,000 18,088 45% Corporation Limited (HPCL), and 24% were raised
from the listing of various central public sector
2012-13 30,000 25,890 86%
enterprises (CPSEs). In 2018-19, government
2013-14 54,000 29,368 54% raised Rs 45,080 crore from exchange-traded funds
and also concluded the sale of REC Limited.
2014-15 58,425 37,737 65%
▪ So far, in the current financial year, the central
2015-16 69,500 42,132 61%
government has raised only 5% of the
2016-17 56,500 47,743 85% disinvestment target that was set in the Budget (Rs
9,111 crore, excluding receipts from the sale of Air
2017-18 72,500 1,00,045 138%
India and its subsidiaries). The Standing
2018-19 80,000 94,727 118% Committee on Finance has noted that the
disinvestment process usually takes a long time
2019-20 1,05,000 50,304 48%
with some entities even undergoing a fourth
2020-21 2,10,000 32,886 16% iteration. In as many as 21 cases, cleared by the
Note: Figures from Union Budget Accounts. Actuals for 2020-21 taken Union Cabinet since 2015-16, the central
from Controller General of Accounts. government is yet to conclude strategic
disinvestment transactions.
Strategic disinvestment has not involved privatisation and has been affected by delays
Revenue from strategic disinvesment CPSEs at different stages of strategic
30
(in Rs crore) disinvestment 21
40,000 20
8
20,000 10 4 2
0
0 Transactions CPSEs under Transactions Transactions
Completed consideration Held up in in Process
2015-16

2016-17

2017-18

2018-19

2019-20

2020-21

for closure Litigation

Note: Includes Air India. Does not include IDBI Bank which was cleared
for strategic disinvestment in May 2021.

▪ Strategic disinvestment involves sale of a substantial portion of the government’s shareholding in a CPSE (up to
50% or more) along with transfer of management control.
▪ In the last six financial years, all the transactions where the government sold more than 51% of its shareholding in
CPSEs, along with transfer of management control, have involved another CPSE picking up the government’s
stake. In 2017-18, the government raised Rs 36,915 crore from the sale of HPCL to the state-owned Oil and
Natural Gas Corporation Limited. Similarly, in 2018-19, the government received Rs 14,500 crore from the sale of
REC Limited to Power Finance Corporation Limited which is another state-owned company in the power sector.
▪ Several strategic disinvestment transactions have been in the pipeline for a long time. For instance, sale of Bharat
Petroleum Corporation Limited, approved in November 2019, is yet to be concluded.

Tushar Chakrabarty
October 12, 2021
[email protected]
PRS Legislative Research ◼ Institute for Policy Research Studies
3rd Floor, Gandharva Mahavidyalaya ◼ 212, Deen Dayal Upadhyaya Marg ◼ New Delhi – 110002
Tel: +91-11-2323 4801, 4343 4035 ◼ www.prsindia.org
 Disinvestment in India PRS Legislative Research

Exchange-traded funds have brought the maximum disinvestment receipts for the government
Amount raised from different methods of ▪ The government uses various methods for
disinvestment between 2015-16 and 2020-21 disinvestment. In the last six years, the most
1,20,000 (in Rs crore) significant modes of disinvestment have been
1,00,000
80,000 exchange-traded funds (ETFs), offer-for-sale (OFS),
60,000 strategic disinvestment, buybacks, and initial public
40,000 offer (IPO).
20,000 ▪ An ETF is a basket of stocks. The government has
0
two primary ETFs: (i) CPSE-ETF and (ii) Bharat 22
Offer for Sale

Others
Intial Public
Traded Fund

Disinvestment

Buyback
Exchange-

ETF. Between 2015-16 and 2020-21, the

Strategic

Offer
government raised the maximum disinvestment
receipts from ETFs.
▪ OFS involves the sale of government’s shareholding
Revenue raised through ETFs and OFS (in Rs crore) in listed CPSEs in the stock market. However, even
this has involved CPSEs buying significant stake in
60,000 other government companies. For instance, in
40,000 2015, Life Insurance Corporation of India (LIC)
picked up 45% of a 10% OFS in Coal India
20,000
Limited. In March 2013, LIC bought 71% of 5.82%
0 stake sale in Steel Authority of India Limited.
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

ETF OFS

New Public Sector Enterprise (PSE) Policy aims to privatise CPSEs across sectors
▪ According to the new PSE policy, the central
Indicative number of CPSEs in various sectors government has divided most sectors into strategic
250 and non-strategic.
192 ▪ In strategic sectors, the government will maintain a
200
bare minimum presence. The remaining entities
150 will be considered for privatisation, merger,
97 subsidiarisation or closure. Sectors categorised as
100 strategic include: (i) atomic energy, space and
62
defence, (ii) transport and telecommunication; (iii)
50 power, petroleum, coal and other minerals, and (iv)
0 banking, insurance, and financial services.
Strategic Sectors Non-Strategic Sectors Outside the ▪ CPSEs in non-strategic sectors will be either
Sectors Policy privatised or closed.
Note: Companies that have already been cleared for strategic
disinvestment/closure are not included.
▪ Certain sectors such as development
financing/refinancing institutions, major port trusts,
and CPSEs providing support to vulnerable groups
have been kept out of the framework.
Sources: Department of Investment and Public Asset Management; Union Budget documents; 25th Report of the Standing Committee on
Finance, March 16, 2021; Annual Report (2018-19), Department of Investment and Public Asset Management; New Public Sector Enterprise
(“PSE”) Policy for Atmanirbhar Bharat, Department of Investment and Public Asset Management, February 4, 2021; “LIC picked up 71% of
shares divested by govt in SAIL on Friday”, The Economic Times, March 26, 2013; “In Coal India stake sale LIC bought almost 50% of shares
on offer”, The Economic Times, February 2, 2015; PRS.

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