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EghtesadOnline: The government has projected higher earnings from selling shares in state-owned companies in the next fiscal budget (March 2021-22) compared to the current budget.

As per the draft published by the Plan and Budget Organization, the government expects to generate 950 trillion rials ($3.8 billion) from selling assets in state-controlled companies. 

That is almost eight times the 115 trillion rials ($460 million) mentioned in this year’s budget. It appears the government's outperformance in realizing the projected income this year has boosted its confidence to earn more in the coming year. 

PBO data shows the Rouhani administration earned 170 trillion rials ($570m) from share sales in the first five months of current fiscal year -- far beyond projection for whole fiscal year. Given the multiple divestment plans, this amount should rise before the current fiscal year is out in March 2021. 

With new investors joining the stock market, the government intends to shore up its finances partly from selling stakes to retail investors as a reliable source of revenue and compensate lost income from crude oil export.

Apart from augmenting the annual budget, the government says ceding shares is in line with plans to downsize and involve the people in the economy -- a stance that has attracted skepticism from diverse quarters.  

 

Constitutional Decree

Divestments are enshrined in Article 44 of the Islamic Republic of Iran Constitution that compartmentalizes the economy into three main parts, namely public, cooperative and private. It obliges the government to transfer 80% of its shares in state-owned and affiliated companies to nongovernment entities. 

As per provisions of the 2021-22budget bill, the government can sell shares via exchange-traded funds and the Tehran stock market. 

The government is allowed to offer a maximum 30% discount on shares offered via ETFs. If ceding shares via ETFs, the government cannot manage the funds for long periods. 

In May, the government offered its remaining assets in Tejarat Bank, Bank Mellat, Bank Saderat Iran, Alborz Insurance Company and Amin Reinsurance Company via the ETF.

The shares were worth 170 trillion rials ($680m).  However, the move failed to attract investors and the government could not make more than 67 trillion rials ($270m). It says it wants to offer the unsold shares in the near future.

In September, the government sold a portion of its stake in four refineries via a second ETF, including shares in Tehran Oil Refining Company, Esfahan Oil Refining Company, Tabriz Oil Refining Company and Bandar Abbas Oil Refining Company. 

That offer too fell flat as barely 20% of the shares were bought and data showed that investors bought units of the ETF worth 130 trillion rials ($520m). The government initially wanted to generate 600 trillion rials ($2.4b) from the four refineries. 

 

Increasing Divestments

There are other plans to sell government debt. The Iranian Privatization Organization said earlier that 12 government-owned companies are on the waiting list to go public.

IPOs are planned for Esfarayen Industrial Complex (steel manufacturer), Opal Parsian Sangan Industrial and Mineral (OPSIM) and Omran-e-Maskan Sazan Iran, a construction company. 

Plans also include launching another ETF for selling government shares in giant enterprises, namely 12.05% stake in the National Iranian Copper Industry Company, 17.2% in Mobarakeh Steel Company and 14.04% in Iran Khodro and 23% in SAIPA (two main domestic carmakers).

 

Budget government Stake