The government of India has decided to sell off two of the biggest companies of India. Finance minister Nirmala Sitharaman has said that the sale of the oil marketing PSU Bharat Petroleum Corporation Limited (BPCL) and airline Air India will be wrapped up by March, 2020.
The historic corporate tax cuts in the recent past, which aimed at reviving the economy, are likely to lead to a deficit in tax collections. Disinvestment of assets and companies owned by the state is how the government plans to meet this deficit.
Sitaraman informed that the selling off of these state-run companies will play a major role in helping the government meet its 1 lakh crore disinvestment target for this fiscal year. She added that the investors have shown a lot of interest in the sale of Air India.
This year, the government is relying on the proceedings from disinvestment in order to bolster revenues as tax collections are suggesting a possible fiscal slippage.
The market capitalization of Bharat Petroleum is almost 1.02 lakh crore. The government is hoping to make about 65,000 crores by selling off 53 percent shares of the company.
The question remains whether disinvestment is the right way to deal with the uncertainty over tax collection? Will the government’s dependency on proceedings from state-run assets and companies prove to be a good decision in the long run?
Are we seeing a major economic slowdown coming soon…