CII Seeks Faster Privatisation; Tax Experts Urge Govt To Hold Off On Surcharge Hike

As the Union Budget 2026-27 nears, industry and tax experts want the government to speed up privatisation and avoid unsettling the tax framework for high-income earners. In its pre-Budget submission, the Confederation of Indian Industry (CII) has urged the Centre to fast-track the privatisation of public sector enterprises (PSEs) through a more predictable, investor-led approach.

The industry body said proceeds from disinvestment could help fund capital expenditure and social priorities without stretching the fiscal balance. CII director general Chandrajit Banerjee said India’s growth engine is now firmly driven by private enterprise.

A clearer and more decisive privatisation policy, he added, would allow the government to focus on core functions while private players bring efficiency, technology and scale to non-strategic sectors.

Push For A New Privatisation Playbook

The CII wants quicker execution of the government’s strategic disinvestment policy, which aims to exit non-strategic sectors and retain a limited presence only where national interest demands. According to industry executives, delays in privatisation have often stemmed from weak investor demand, valuation mismatches and policy uncertainty.

To fix this, CII has suggested moving away from the current approach where enterprises are identified first and buyers are sought later. Instead, it has sought a demand-based model, where investor interest is assessed upfront across a wider set of PSEs. Market participants said this could help the government focus on assets with better valuation potential and avoid repeated postponements.

The industry body has also proposed a rolling three-year privatisation pipeline. Such advance visibility, analysts said, could help investors plan capital allocation and improve price discovery, especially for large-ticket transactions.

Another recommendation is the creation of a dedicated institutional framework to manage privatisation. CII has suggested a ministerial board for strategic oversight. This would be an independent advisory board with industry and legal experts, and a professional execution team to handle due diligence and regulatory coordination. Tracking post-privatisation outcomes is also part of the proposal, aimed at improving accountability.

Staggered Stake Dilution To Raise Funds

Recognising that outright privatisation may take time, CII has suggested a calibrated divestment route as an interim step. Under this approach, the government could first reduce its stake in listed PSEs to 51% and later pare it down further to a range of 33% to 26%.

CII estimates this approach could unlock nearly ₹10 trillion. In the first phase, lowering stakes in 55 PSEs where government holding is already 75% or less could raise about ₹4.6 trillion over two years. A second phase covering 23 PSEs with higher government ownership could fetch another ₹5.4 trillion. These numbers have gained attention as the exchequer faces pressure from lower tax inflows.

Tax Experts Flag Risks Of Higher Surcharges

Also, as the budget approaches, speculation has grown over whether the government may look at higher income tax surcharges on the super-rich or revive wealth tax. Tax experts, however, have warned against such moves.

Currently, high-income individuals earning over ₹50 lakhs pay a surcharge ranging from 10% to 25%, depending on income. For those earning above ₹5 crores, the surcharge is 25% under the new tax regime and 37% under the old regime.

Experts feel that while India follows the principle of higher tax for higher income, rates need to be balanced. Making taxes too prohibitive could push wealthy individuals to relocate to lower-tax jurisdictions, something that is easier in today’s globalised world. They cautioned that higher taxes could hurt entrepreneurship and job creation, adding that global competition for capital remains intense.

Clear Broad Signals

As budget discussions gather pace, the broad signal from industry and tax advisors is clear. They want the government to unlock value from public assets, keep taxes predictable, and avoid moves that could unsettle investor confidence.

Sources:

Business Standard
Business Standard