Disinvestments Current Affairs - 2020
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Government of India misses its disinvestment target as the plan to sell Bharat Petroleum Corporation Limited (BPCL), Air India and Container Corporation of India has not been succeeded.
The Government had planned to sell 53.3% of BPCL, 31% of Concorp as per latest market prices. The Government had set the Disinvestment target of Rs 1.05 trillion for the year 2019-20. However, it was only able to extract Rs 17,364 crores. This has increased burden on the economy of the country as the fiscal deficit of the Government has already touched 115% of the budget estimated for the year 2019-20 as far as November 30. The deficit will increase further as there are another 4 months (Dec-Mar) to go before the financial year ends. The data was released by the Controller General of Accounts.
The missing of disinvestment target has impaired its ability to meet its Fiscal Deficit target of 3.3% of GDP. The fiscal deficit is arising in spite of RBI transferring Rs 1.76 lakh crore rupees. It was widely criticized as windfall money of the government.
What is Windfall money?
Windfall money is the term used for unexpected money good fortune. The RBI transferred the windfall to the GoI on recommendation of Jalan Committee.
Among all the disinvestment targets, Air India is the least performing and at huge losses. In order to solve the problem, recently it was announced that Air India will stop issuing tickets to government agencies that owe more than Rs 10 lakh due. This included defence accounts, CBI, BSF, Enforcement Directors, customs commissioners, etc.
Tags: Air India • Bimal Jalan Committee • BPCL • Disinvestments • Fiscal Deficit
State-owned Power Finance Corporation (PFC) has completed the acquisition of majority stake in REC Ltd by transferring Rs 14,500 crore to the government.
The merger of both the entities is expected to be completed in the next fiscal year in consultation with the government. This acquisition and merger will make PFC second-largest government-owned financial player in the country based on the current market capital after State Bank of India (SBI) and also PFC will be the third-highest profit-making financial player in India.
About the Acquisition
- PFC paid Rs 14,500 crore to the Union government to buy a 52.63% stake in REC.
- This acquisition results in an $80-billion lending giant by assets and potentially helps in faster resolution of stressed assets in India’s power sector.
- The acquisition also helped the union government exceed its disinvestment target of Rs 80,000 crore for the fiscal year 2018-19.
- The consolidation will help in raising funds at competitive costs and lead to convergence of lending policies and rates.
- Further, it will also help in improving asset quality and impress upon state utilities to improve their performance.
PFC taking over REC makes it a dominant player not only in the power sector but also in the entire financial market space. PFC’s strategic importance to the government will further increase upon completion of the acquisition as the combined entity will become the biggest non-bank finance entity in which the government holds a controlling stake.
Since the PFC and REC have a robust presence in the consortium of lenders to power companies, the consolidation will help in the faster resolution of stressed assets.