CII and NITI Aayog Propose Wealth Fund from Privatisation Proceeds
Amid a notably weak disinvestment performance in the current financial year, significant proposals are emerging to revitalise India's privatisation efforts. Industry body CII, various government departments, and the think tank NITI Aayog have put forward recommendations for the government to substantially increase privatisation activities. The core idea involves channelling the proceeds from these sales into a dedicated wealth fund, specifically earmarked for strategic infrastructure development and high-profile national projects.
Historical Context and Current Challenges
While the central government has previously attempted to create a dedicated fund for disinvestment receipts, those initiatives failed to gain traction. The current proposal before the finance ministry aims to learn from past shortcomings by formally establishing a wealth fund. However, the practical implementation and utilisation of such funds remain uncertain, especially considering the government's earlier experiment with the National Investment and Infrastructure Fund, which leveraged foreign exchange reserves with limited success.
The Modi government's track record on privatisation and asset monetisation, aside from the Air India sale, has been underwhelming. Over the past five years, strategic sales have been minimal, with only Air India, Neelachal Ispat Nigam, and Ferro Scrap Nigam making the list. Notably, the government held only shares in the airline. The ongoing stake sale in IDBI Bank, managed by the Department of Investment and Public Asset Management, has faced delays and is expected to extend into the next fiscal year.
Stalled Deals and Political Considerations
Several other major privatisation deals, including those involving Shipping Corporation, Concor, and BEML, have seen little progress, creating a perception that the Centre's interest in privatisation has waned. Petroleum Minister Hardeep Puri has confirmed that the sale of oil retailers is currently on hold. The 2024 electoral outcome initially prompted a cautious approach, but recent months have seen the government push forward with other critical reforms, such as implementing labour codes, signing trade pacts, and reducing GST rates.
With upcoming elections in five states and polls in Uttar Pradesh scheduled for next year, strong political will is essential to reinvigorate the privatisation programme. Even the asset monetisation initiative, which includes properties like the Ashok Hotel in the capital and various stadiums, has not achieved significant milestones. Entities like NHAI and Powergrid have resorted to the InvIT route for road projects, highlighting the challenges in this domain.
The proposals from CII and NITI Aayog represent a strategic push to align privatisation proceeds with national development goals, but overcoming historical hurdles and political dynamics will be crucial for success.
