Budget 2026-27 is days away. Disinvestment receipts, which used to be a major source of non-debt capital receipts to fund the budget, have dwindled to almost nothing. Dividend receipts, a major non-tax receipt, on the other hand, are buzzing.
Disinvestment proceeds arise out of selling shares of listed central public sector companies (CPSEs) or privatising listed or unlisted CPSEs (including banks and financial sector companies). Dividends flow from the profits earned by these CPSEs.
The government is sitting over more than Rs 40 lakh crore in market value of CPSE shares listed on stock exchanges as per data published on Department of Investment and Public Assets Management (DIPAM) website. 5 percent disinvestment can yield Rs. 2 lakh crore.
The government earned about Rs. 75,000 crore dividend receipts in 2024-25 and has already received about Rs. 50,000 crore in the current year, as per the DIPAM website.
So, should the government disinvest or keep milking CPSEs for dividends? Should it do both?
Disinvestment Stalled
The government has stopped setting disinvestment targets and disclosing disinvestment proceeds in budgets. The disinvestment receipts currently form part of an opaque receipt head called miscellaneous capital receipts (MCRs), which also houses receipts from monetisation of NHAI roads and other sundry asset sale. To get a sense of how disinvestment been functioning, one has to look at DIPAM data.
As per DIPAM data, disinvestment proceeds amounted to Rs. 84,972 crore in 2018-19, the last year of Modi 1.0. In second term unfortunately, the disinvestment receipts kept declining every year. In 2019-20, it fell to Rs. 50,300 crore. Next year in 2020-21, it declined further to Rs. 32,886 crore. Disinvestment receipts tanked to a multi-year low of Rs. 13,534 crore in 2021-22. In 2022-23, it revived a bit bringing Rs. 35,294 crore. In the final year of Modi 2.0, 2023-24, the disinvestment receipts again plummeted to Rs. 16,507 crore.
Disenchantment with disinvestment continues unabated in the third term. In 2024-25, the disinvestment proceeds yielded only Rs. 10,163 crore, the lowest ever of Modi government. The government did only two PSU disinvestment transactions selling 3.39 percent of GIC Ltd. for Rs. 2,346 crore and 4.95 percent of Cochin Shipyard for Rs. 2,015 crore. Sale of 1.62 percent stake in HZL Ltd. brought Rs. 3,449 crore. In current year 2025-26, the government has undertaken only three transactions so far selling 3.61 percent of Mazagaon Dock for Rs. 3,673 crore, 6 percent of Bank of Maharashtra for Rs. 2,624 crore and 2.17 percent of Indian Overseas Bank for Rs. 1,419 crore.
Of late, the government seems to be indicating some interest in reviving disinvestment programme, although there is no visible action on the ground.
Dividends Increased But Did Not Outperform
Dividend receipts, excluding RBI surplus transfer, were Rs. 45,421 crore in 2018-19, also the last financial year of Modi 1.0. Covid-19 disrupted profitability of CPSEs, especially banks and insurance companies. Dividend receipts declined to Rs. 38,146 crore in 2019-20 and to Rs. 39,750 crore in 2020-21. It was a fiscal shock.
CPSEs turned profitable from 2021-22, especially oil marketing companies (OMCs), with global oil prices declining. Banks and financial companies also came back to profitability. Government’s dividend receipts ballooned to Rs. 61,547 crore in 2021-22, further to Rs. 69,607 crore in 2022-23 and touched the high of Rs. 83,461 crore in 2023-24, last year of Modi 2.0. Taking five-year of Modi 2.0, dividends receipts yielded a compound annual growth rate (CAGR) of 12.94 percent, an excellent growth by any measure.
Actual data for 2024-25 will be disclosed in the budget 2026-27. However, given dividend receipts of Rs. 74,129 crore disclosed on DIPAM website; it should be exceeding the 2023-24 receipts to come around Rs. 90,000 crore. The government managers seems to be factoring in a receipt of Rs. 1 lakh crore for 2025-26, with banks nudged to distribute larger share of profits by the RBI.
Dividends, however, on a long-term basis, have not grown very healthily. In 2013-14, the year before Modi government took over, the government had received Rs. 57,425 crore in dividends. Dividend receipts of Rs. 45,421 crore at the end of Modi 1.0 in 2018-19 had resulted into actual negative CAGR of (-) 2.46 percent. Taking into account excellent growth of 12.94% in second term, at the end of Modi 2.0, the ten-yearly compounded growth of Modi government was a measly 3.81 percent.
Dividends receipts primarily arises from three sectors- oil and petroleum sector, electricity sector and public sector banks. All these sectors are cyclical, and their profitability depend on many factors which are not entirely in their or government control. It is, therefore, not advisable to bank upon a high and consistent growth for dividend receipts.
Disinvestment and Dividend Together
Receipts from disinvestment and dividend together have hardly moved the needle during Modi era.
In 2018-19, with disinvestment receipts of Rs. 84,972 crore and dividend receipts of Rs. 45,421 crore, the government had received, in all, Rs. 1.30 lakh crore. In 2023-24, with disinvestment receipts of Rs. 16,507 crore and dividend receipts of Rs. 83,461 crore, the government received Rs. 99,968 crore, less than a lakh crore rupee.
Total disinvestment and dividend receipts in 2024-25 and 2025-26 are unlikely to exceed the receipts from these two sources in 2018-19. On the whole, the CPSEs, as both disinvestment and dividend comes from them, are contributing less to the exchequer than they did in 2018-19.
This situation needs to change.
There is a limit to increasing dividend receipts from CPSEs. More dividends also leave less for capital expenditure by the CPSEs, hurting their long-term competitiveness and profitability. The disinvestment makes no difference to the health of CPSEs. Rather, infusion of private shareholders bring more professionalism.
In view of this, there is every reason, fiscal soundness and professional functioning of CPSEs, that the government raise the game in disinvestment in Budget 2026-27. A 5 percent disinvestment will bring the government more than Rs. 2 lakh crore.
The government need not sell 5 percent in all the CPSEs. There are many CPSEs and banks where government equity exceeds 75%. Selling equity above 75 percent in these CPSEs will yield requisite receipts to the government. If the government can muster courage to do one or two privatisations, it will add a big icing to the cake.
Fiscal situation is under stress on account of tax giveaways and unrelenting expenditures. Renewed disinvestment push would relieve that to some extent.
(Subhash Chandra Garg is the Chief Policy Advisor, SUBHANJALI, and Former Finance and Economic Affairs Secretary, Government of India. He's the author of many books, including 'The $10 Trillion Dream Dented, 'We Also Make Policy', and 'Explanation and Commentary on Budget 2025-26'. This is an opinion piece, and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)