Thursday, 11 Sep, 2025
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The disinvestment strategy shifts as FY25 proceeds hit a record low, down from Rs 16,507 crore in FY24. The government moves away from aggressive stake sales, signalling a policy transformation amid evolving fiscal priorities.
The Centre’s disinvestment drive is faltering. In FY25, proceeds from selling stakes in public sector enterprises (PSEs) are set to hit an 11-year low, with just Rs 9,319 crore raised so far—the weakest performance under this Modi administration, the Business Standard reported on March 19. Also, the shortfall raises questions about the future of the country’s privatisation agenda, a key tool for reducing the fiscal deficit and improving public sector efficiency.
The slowdown reflects multiple factors: tepid investor appetite, bureaucratic hurdles, and shifting government priorities. The once-ambitious disinvestment targets—such as offloading stakes in Bharat Petroleum and IDBI Bank—have seen repeated delays. Meanwhile, a strong stock market has ironically made the government more hesitant to sell shares at lower valuations.
With fiscal pressures mounting, the finance ministry may need to rethink its approach. A shift towards minority stake sales through exchange-traded funds (ETFs) or strategic privatisation in select sectors could revive momentum. However, unless the government addresses regulatory bottlenecks and reassures investors, its disinvestment programme risks losing credibility—forcing it to rely more on traditional revenue streams such as taxes and borrowings.
India’s disinvestment drive is witnessing a policy transformation. With proceeds expected to hit a new low in FY25—down from ₹16,507 crore in FY24 and ₹13,534 crore in FY22—the government has effectively abandoned aggressive stake sales.
Rather than setting fixed disinvestment targets, the focus is now on:
Enhancing PSU Performance: Improving operational efficiency to make state-run enterprises more competitive.
Boosting Capital Expenditure (Capex): Using retained earnings to drive growth rather than relying on outright stake sales.
Higher Dividends: Extracting value from profitable PSEs without losing control.
Gradual Stake Dilution: Selling shares in a phased manner to avoid market disruptions.
Selective Privatisation: Exploring full exits only in strategic cases.
Experts are of the view that the approach gives the government more flexibility but limits its ability to generate immediate fiscal relief. The slow pace of stake sales could disappoint investors looking for deeper privatisation, while reliance on dividends might not be sustainable long-term. The Centre will have to strike a balance—ensuring PSEs remain competitive while keeping its fiscal math in check.
The disinvestment strategy is shifting gears. Once driven by minority stake sales and strategic exits from CPSEs, the government is now emphasising ‘value creation’ over outright privatisation. The pace of strategic disinvestment—where the government fully or substantially sells a CPSE along with management control—has slowed, reflecting both political caution and market constraints.
The government has raised Rs 9,319.05 crore so far in FY25 through stake sales in state-run firms. It offloaded 3.39 per cent in General Insurance Corporation of India, generating Rs 2,345.55 crore, and 4.95 per cent in Cochin Shipyard, adding Rs 2,015.32 crore via offer-for-sale (OFS) routes.
A 1.62 per cent stake sale in Hindustan Zinc brought in Rs 3,449.18 crore, while Rs 1,509 crore was recorded from remittances under the Specified Undertaking of the Unit Trust of India (SUUTI). These receipts contribute to the government’s broader fiscal consolidation strategy, the report mentioned.
The disinvestment drive is losing steam, with only 10 of 33 cases completed. Stalled sales, including BPCL and IDBI Bank, signal political caution. Without reforms, the privatisation push risks fading into uncertainty.
