Relevance : GS Paper III
Recent, the Cabinet Committee on Economic Affairs (CCEA) approved the strategic disinvestment of five public sector enterprises, namely, Bharat Petroleum Corporation Ltd (BPCL), Container Corporation of India Ltd, Shipping Corporation of India, Tehri Hydro Power Development Corporation (THDC) and the North Eastern Electric Power Corporation (NEEPCO).
Reasons behind these disinvestments
- The proceeds from these stake sales will help the Centre move closer to achieving its disinvestment target of Rs 1.05 lakh crore for this year.
- So far this year, the government has been able to garner only Rs 17,364 crore or 16.5 per cent of its budgeted disinvestment target.
- The Centre is facing huge shortfalls in both direct and indirect tax revenues, and its gross tax revenues have grown by a mere 1.5 per cent in the first half (April to September) of the current financial year.
The concern with the recent disinvestment
- With only four months to go, it is not clear whether these stake sales can be wrapped up by the end of the financial year.
- It should also not be another case of public sector firms stepping in to buy these entities in order to bail out the government.
- The government would benefit from drawing up a more ambitious, better laid out, medium-term plan for disinvestment, rather than approaching it as merely an arrangement for plugging its revenue gaps.
- It should draw up a list of potential candidates and release an advance calendar, indicating the period of disinvestment. This would help draw in more buyers.
- Further, the proceeds from disinvestment should be used only for the creation of new assets, not to meet its revenue expenditure.