LIC IPO rollout is estimated to fetch the government about Rs 65,000 crore. It is expected to be delayed amid a turmoil in the stock market triggered by Russia’s invasion of Ukraine.
The likely deferral of the proposed LIC IPO — set to be India's biggest public offering — to FY23 is expected to increase the budget shortfall for FY22, thereby pressuring the Reserve Bank of India (RBI), public sector banks, and state-run companies to pay a higher dividend to the government.
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According to an Economic Times report, the "postponement" of the share sale of the Life Insurance Corporation of India has raised expectations on Dalal Street that the government might be paid a higher dividend by public institutions. However, the Centre has not issued any statement concerning the matter so far.
It is anticipated that the rollout of the LIC IPO — estimated to fetch the government about Rs 65,000 crore — will be delayed into the next financial year amid a turmoil in the stock market triggered by Russia’s invasion of Ukraine. The money expected to be made from the LIC IPO rollout was crucial to Centre's budget math. However, as the IPO is likely to be delayed now, the government isn't left with many revenue-generating avenues besides pocketing higher dividends — to fill the gap.
In FY21, state-run companies and banks paid a cumulative dividend of Rs 75,000 crore to the government. The highest payments were made by BPCL (Rs 16,500 crore), Indian Oil Corp. (Rs 11,000 crore), and Coal India (Rs 10,000 crore), among others. In this fiscal so far, the Centre has been able to raise about Rs 12,000 crore from the Air India privatisation and by selling a portion of its stake in other state-run companies.
However, some experts feel that asking state-run companies and banks to cough up more dividends may not be enough to fill the budget gap. If their fears hold true, the government may miss its revised target for FY22 fiscal deficit — 6.9 percent of GDP.
Separately, the state-run companies are already paying 30 percent of their profits or 5 percent of their net worth (whichever is higher) to the Centre. Therefore, pressuring them to pay more may hurt their capex plans.