Govt may fall short of divestment target due to union opposition

NEW DELHI: India will fall well short of its ` 58,400-crore disinvestment target this year, despite a big stock market rally that has attracted foreign investors, two government sources told Reuters.

Prime Minister Narendra Modi’s selloff agenda has met with resistance from labour unions.

Officials say a fall in global oil prices will reduce the government’s subsidy burden, giving it a greater chance of hitting its fiscal deficit target of 4.1% of GDP in 2014-15.

But they warn that revenues from share sales could reach just half the target, forcing the government to once again take the axe to spending, after it last week banned bureaucrats from flying first class and staying at five-star hotels.

“At the most we could raise ` 25,000-`30,000 crore from disinvestment this year,” one senior finance ministry official said.

In his maiden budget, finance minister Arun Jaitley had set a target of raising ` 58,400 crore from the sale of government’s stake in companies.

The budget assumes that selloff proceeds will generate 5.6% of total revenues.

“Given the sluggish growth of tax revenues in (the) first half of 2014-15, meeting the disinvestment target would be crucial to ensure that the fiscal deficit remains in line with the budgeted level,” said Aditi Nayar, an economist at ICRA, the Indian arm of rating agency Moody’s.

The government is in the final stages of preparing its first major sale: 5% in ONGC. The Cabinet has cleared a 10% stake sale in Coal India that could raise nearly $3 billion (`18,000 crore), besides sales of NHPC and SAIL stakes.