RBI’s Record Dividend Reduces Need for Major Divestments; Government to Stick to Rs 50k Crore Target: Report

The Reserve Bank of India's record dividend payout of Rs 2.1 lakh crore will reduce the need for significant divestments, according to a domestic rating agency, Care Ratings. On Thursday, the agency noted that the new government is likely to stick to the interim budget's target of Rs 50,000 crore from divestments.

"With a bumper dividend from the RBI, the central government's fiscal position remains comfortable, which may limit the urgency to push ahead with big-ticket divestments," it said.

In case there is a shortfall in resource accumulation, the government might turn to asset monetization, the report added.

The expected sale of the Shipping Corporation of India (SCI) within the year will aid the government in achieving its FY25 target, Care Ratings mentioned.

"After the demerger of land assets of the Shipping Corporation of India (SCI), its possible divestment looks likely in FY25, provided favourable market conditions prevail. If the government offloads its entire stake in SCI, it could generate Rs 12,500-22,500 crore as divestment proceeds," according to the report.

Other potential divestment candidates include CONCOR and Pawan Hans, though they remain in a slower progression phase, the agency said.

Over the past decade, the government has raised Rs 5.2 lakh crore through divestment initiatives.

According to the report, the government could potentially raise Rs 11.5 lakh crore by selling stakes in state-owned companies without reducing its stake below 51 percent.

Divesting stakes in central public sector enterprises could contribute Rs 5 lakh crore, while selling stakes in insurance firms and banks could bring in Rs 6.5 lakh crore, the report indicated.

The government may not choose to divest all its assets, as decisions regarding the sale of these listed firms might be influenced by the strategic importance of the industry, the profitability of the companies, financial market conditions, and social or welfare considerations, the agency concluded.