Disinvestment in name only...

The White Knight

It’s become a practice to set big targets for disinvestment in the budget; only to miss them later. If it was only about just missing the target it was ok; but no, government is doing far more worse things. In all those worse moments when government’s asset selling plans didn’t work well in the market, it’s another arm would jump in to fray and save administration by pumping its own money. There are no points for guessing who is this white knight – it is Life Insurance Corp.

Last year government set a disinvestment target of 58,425 crore, but raised only 26,353 crore. This year target was even more ambitious – 69,500 crore. However, till now (i.e. after one and half quarter) GoI raised only 12,563 (9,300 crore came from the sale of 10% stake in IOC).

But the catch here is, 90% of that 9300 crore came from our white knight – LIC. Through this deal LIC raised its stake in IOC from 2.5% to 11%. What more, LIC also raised its equity investment target fir this year to 60,000 crore. This is somewhat close to government’s disinvestment target :)

Is this really disinvestment? It more like transferring money from one government company to another one. The only difference is, in LIC’s case it belongs to public. If government is going to do disinvestment in this way, isn’t better to ask LIC to buy certain amounts of shares? What is the need to go through this elaborate exercise?

Sajeev.