'Calibrated disinvestment can serve as an interim measure while privatisation remains a long journey.' Critically analyse in the context of India's fiscal consolidation.

Calibrated disinvestment means selling small, phased minority stakes in public sector enterprises, mostly through an Offer for Sale (OFS) on the stock exchange, while the government keeps control. It is a stopgap inside the New PSE Policy, 2021. That policy keeps only a bare-minimum state presence in four strategic sectors and requires privatisation or closure everywhere else [1]. It works well for raising money but does little to reform the enterprises.

Merits as an interim fiscal tool

• Non-debt capital receipts: the money pays for capital spending without adding to borrowing, which helps the deficit-reduction path.
• Speed: only 4 of 24 CPSEs approved for strategic sale had been sold by 2018-19 [3]. An OFS can be completed in days when markets are favourable.
• Credible budgeting: receipts met budget estimates only in 2017-18 and 2018-19 [5]. In FY22, a ₹1.75 lakh crore target brought in just ₹9,330 crore by late January [4]. Smaller, achievable targets make the budget more believable.
• Market discipline: once private shareholders hold a stake, the company must disclose more and faces market pressure.
• Complements monetisation: the National Monetisation Pipeline aims to earn about ₹6 lakh crore from brownfield public assets over FY22–25 while the government keeps ownership [6].

Limitations

• No efficiency gain: management does not change, so a core reason for disinvestment is not met.
• Money moving between government bodies: the CAG called NTPC's purchases of other government companies "sector consolidation" rather than disinvestment. In the Kamarajar Port sale, the buyer, Chennai Port Trust, borrowed about 74.5% of the price [2]. The budget shows a non-debt receipt, but public-sector debt goes up.
• Unclear valuation: discounts with no recorded reason changed Kamarajar's reserve price by about ₹576 crore [2].
• Interim becoming permanent: the exit from non-strategic sectors required by the 2021 policy keeps getting postponed [1].
• "Family silver" risk: if one-time receipts pay for recurring revenue spending, fiscal consolidation is weakened, not helped.

Way forward

• An Independent External Monitor should check valuations while the sale is still in progress, as the CAG recommended [2].
• Budget documents should report sales to other government bodies separately from sales to private buyers.
• A rolling, multi-year plan for strategic sales, modelled on the NMP [6].
• Sale proceeds should be reserved for capital spending.

Calibrated disinvestment can fill a short-term fiscal gap, but it cannot replace privatisation. It should run alongside a time-bound plan for strategic sales, with transparent valuation and proceeds used to build assets. That way it serves both fiscal consolidation and the 2021 policy's aim of a lean, efficient public sector, in line with the FRBM goal of sustainable public finances.