Benefits of Disinvestment
Benefits of DisinvestmentSome overall benefits of Disinvestment, irrespective of the approach used are as follows:
For the Government 1. | Raising valuable resources for the government, which could be used to bridge the fiscal deficit for one, but also for various developmental projects in key areas such as infrastructure. The Financial Times (20th May 2009) quotes a report brought out by the French securities firm CLSA to state: “A reduction in shareholding to hypothetically 51% across all the state-owned entities could bring in USD 62 bn (Rs. 2.9 lakh crore approximately) at current market prices (thus valuing the government holdings in listed state-owned companies at Rs 8.8 lakh crore). Even a 10% stake sale in the ten large public state undertakings that are likely disinvestment candidates can bring in USD 17 bn (Rs. 80000 crore approximately)". Another such estimate by Delhi-based PRIME Database suggests that if the Government follows up on its promise of bringing down its equity stake in listed CPSEs to 66%, it can mobilise Rs. 11040 crore going by the current market valuations. | 2. | Apart from generating a one-time sale amount, a lot of these stake sales would also result in annual revenues for the government, as has been shown in the past. | 3. | The government can focus more on core activities such as infrastructure, defense, education, healthcare, and law and order. | 4. | A leaner government with reduction in the number of ministries and bureaucrats. |
For the Markets and Economy
1. Brings about greater efficiencies for the economy and markets as a whole
For the Taxpayers 1. | Letting go of these assets is best in the long term interest of the tax payers as the current yield on these investments in abysmally low. Even if the funds from the sale are not utilised for bridging fiscal deficit, a much better utilisation of these ‘stuck’ funds would be into critical sectors such as healthcare, education and infrastructure | 2. |
For the Government 1. | Raising valuable resources for the government, which could be used to bridge the fiscal deficit for one, but also for various developmental projects in key areas such as infrastructure. The Financial Times (20th May 2009) quotes a report brought out by the French securities firm CLSA to state: “A reduction in shareholding to hypothetically 51% across all the state-owned entities could bring in USD 62 bn (Rs. 2.9 lakh crore approximately) at current market prices (thus valuing the government holdings in listed state-owned companies at Rs 8.8 lakh crore). Even a 10% stake sale in the ten large public state undertakings that are likely disinvestment candidates can bring in USD 17 bn (Rs. 80000 crore approximately)". Another such estimate by Delhi-based PRIME Database suggests that if the Government follows up on its promise of bringing down its equity stake in listed CPSEs to 66%, it can mobilise Rs. 11040 crore going by the current market valuations. | 2. | Apart from generating a one-time sale amount, a lot of these stake sales would also result in annual revenues for the government, as has been shown in the past. | 3. | The government can focus more on core activities such as infrastructure, defense, education, healthcare, and law and order. | 4. | A leaner government with reduction in the number of ministries and bureaucrats. |
For the Markets and Economy
1. Brings about greater efficiencies for the economy and markets as a whole
For the Taxpayers 1. | Letting go of these assets is best in the long term interest of the tax payers as the current yield on these investments in abysmally low. Even if the funds from the sale are not utilised for bridging fiscal deficit, a much better utilisation of these ‘stuck’ funds would be into critical sectors such as healthcare, education and infrastructure | 2. |