Why has the CAG objected to the sale of some of the key PSUs like PFC and HPCL?

The CAG has not objected to the sale of PSUs but it has expressed its unhappiness with the way such transactions are accounted. In fact, the CAG has come down heavily on showing the inter-PSU sale of investments as disinvestment revenues.

In a recent interview, the Comptroller & Auditor General observed that such disinvestments resulted in transfer of resources already with the public sector to the government. To that extent, it was not a genuine divestment as it did not lead to change in control.

There was hardly any shift in stake in such cases. CAG also observed this about the sale of stake in banks as well as the sale of HPCL to ONGC. It may be recollected that the government stake in HPCL was taken over by ONGC paying out of its reserves.

The CAG also noted that In FY19, divestment revenues were largely driven by such cross holdings and could not really be added to the divestment revenues of the government as these assets were never shown in the books of the government in the first place.

The FY19 divestment plan also included the mega sale of government stake in Power Finance Corporation to Rural Electrification. In addition, the CAG also pointed out that SUUTI sales could not be shown as divestment receipts as there were not state assets.