The Union Budget 2025-26 has introduced a subtle yet significant change in the way capital receipts are presented. Instead of specifying disinvestment targets, the budget now bundles them under “miscellaneous capital receipts”, which include privatisation, asset monetisation, and stake sales.

Key Highlights of the Disinvestment Shift

Reduced Transparency in Disinvestment Targets

• 2025-26 budget sets the target for miscellaneous capital receipts at ₹47,000 crore.
• This is in line with last year’s target, despite the government’s inability to achieve its disinvestment targets in the last few years.
• The government has been shy of setting any specific disinvestment targets as it has disappointed every year so far.

Disinvestment Goals Missed for Consecutive Years

• In the FY 2024 25, stake sales such as GIC of India raised less than ₹10,000 crore in proceeds. Therefore, by all means the full year target cannot be met.
• The last major privatisations were undertaken for Air India and Neelachal Ispat in the year 2022. The previous year had a tall disinvestment targets of
• ₹1.05 trillion during 2019 20; ₹2.1 trillion 2020-21.
• ₹1.75 trillion in 2021 22
• However, the targets were never achieved, which is surprising since the public sector valuations have increased over the last few years.

Backtracking on the 2021 Privatization Policy

• In 2021, the government had pledged to restrict state owned enterprises to four strategic sectors.
• Close down or privatise all Public Sector Units (PSUs), not strategic in the government’s opinion.
• Privatization has come to a standstill without any public debate or justification.
• Example: Disinvestment of IDBI Bank is in limbo despite repeated interest from investors.

Moving Head in Contrary Direction: Investment in Sick PSUs rather than Privatising

• Instead of selling Visakhapatnam Steel Plant for instance, the govt has splurged its precious taxpayer’s money into beleaguered PSUs.  Here’s how:
•  It approved the Rs 11,500 cr revival package of RINL Rashtriya Ispat Nigam Ltd operator of Visakhapatnam steel plant who’s liabilities tally over Rs 35,000 crore.

Fiscal Constraints Make Disinvestment More Critical:

• The government is faced with a challenging fiscal scenario in which it is looking to fund capital spending without raising taxes.
• The FY 2025-26 budget managed to lower personal income tax revenues by ₹1 trillion while permitting capital expenditure to rise at a decelerating pace.

Disinvestment

Disinvestment is the selling or liquidation of assets, subsidiaries, and business units by an organization or government. It can also be termed as reducing capital expenditures.

Why is disinvestment done?

• Strategic focus: Companies can concentrate on their core business and improve efficiency
• Free up capital: Companies can raise funds to invest in more profitable ventures or reduce debt
• Environmental reasons: Disinvestment for environmental reasons
• Political reasons: Disinvestment can be done for political reasons

Types of disinvestment

• Minority disinvestment: The government retains a majority stake in the company, usually more than 51%.
• Majority disinvestment: The government sells a majority stake in the company to private investors.
• Complete privatization: The government sells the entire enterprise to private investors.

How is disinvestment done?

• Institutional placement: The government sells its stake to financial institutions
• Exchange traded funds: The government sells its equity participation in several companies through ETFs
• Cross-holding: Listed public sector undertakings (PSUs) acquire the stake owned by the government in other PSUs