Modi 2.0 aims to raise $47 billion from disinvestment in 5 years

New Delhi: The government has plans to raise as much as Rs 3.25 lakh crore ($47.4 billion) in the next five years by reducing its stakes in some large state-owned firms to 40 per cent, two senior government officials told Reuters, in the nation’s biggest privatisation push in more than two decades.

Last week, Finance Minister Nirmala Sitharaman in her budget announced that the government will look to reduce direct controlling stakes in some state-run firms on a case-by-case basis.

The plan will open up a steady stream of state companies to greater private investment, and target the kind of annual divestment revenue that will be crucial to meet fiscal deficit targets.

Prime Minister Narendra Modi’s administration already sold government stakes in a host of companies to raise a record $40.92 billion in his first five-year term, nearly three times the divestment proceeds of $14.52 billion achieved by the Congress party government in 2009-2014.

The government has identified a number of state-owned firms, including Oil and Natural Gas Corp, Indian Oil Corp,  GAIL (India), NHPC, NTPC, NMDC, Coal India and Bharat Heavy Electricals Ltd, said the sources, who declined to be named due to the sensitive nature of the matter.

“We have done a calculation on current prices and we could get Rs 3.25 trillion if we bring our stake down to 40 per cent in government companies, excluding banks,” one of the officials said.

The two officials, though, said the government is yet to gauge investor appetite for the state-owned companies and that the level of demand will be crucial to any timetable.

Analysts said the government would need to be flexible, especially given that a lot of the companies were in the resource sector and their prices would often depend on the volatility of commodities prices.

New Delhi wants to reduce its holdings in such a way that the cumulative stake of the government and state-owned companies such as Life Insurance Corporation (LIC) would continue to be above 51 per cent.

This year, the government is planning to put stakes in a group of companies into exchange traded funds, which would then be sold on public markets and raise at least Rs 40,000 crore, the officials said. The state’s stakes in those companies would be cut to 51 per c ent in some cases.

The government has set a divestment target of Rs 1.05 lakh crore for the current fiscal year.

It is in the process of identifying some power companies for merger with a view to cutting its stakes to 40 per cent, one of the sources said.

Eventually, the officials say the government would like to see its shareholdings reduced to 26 per cent in some companies if the ruling BJP gets a third term.