Govt mulls use of disinvestment proceeds

The government is believed to be debating whether the proceeds from the much-talked about proposed disinvestment in unlisted public sector units should be used for financing the rising fiscal deficit or be ploughed to fulfill business needs of these firms and social sectors.     

However, the government has so far not set any definite target for the amount it wishes to raise through disinvestment in public sector units (PSUs), an official source told PTI.     

The government is deliberating whether it should give preference to issuing fresh shares in public sector undertakings or straightway divest its stake, the source said.     

In the first case the proceeds would go to Consolidated Fund of India, which could be used for financing fiscal deficit, and in the latter it may be channelised to National Investment Fund (NIF), created in 2007 for social welfare schemes and revival of PSUs.     

"We have to figure out how much you have to get in NIF (National Investment Fund) and in the Consolidated Fund. That is the debate which is going on. What should you do with the money that is a debate which has started," the source stated.     

Besides, the proceeds could also go to the company for financing its expansion plans, he said.     

The government may exercise both the options — issuing fresh shares and straightway diluting its equity in PSUs, he pointed out.     

"It happened in case of Powergrid and REC," he added.

However, there is no definite roadmap for disinvestment policy so far and even budget may not give an exact structure of the policy, the source said.     

Although, President Pratibha Patil in her address to the Parliament said, "My government will develop a roadmap for listing and people-ownership of PSUs while ensuring that the government equity does not fall below 51 per cent."     

There have been voices from various quarters that the proceeds from disinvestment can be used to plug the rising fiscal deficit which was 6.2 per cent of the GDP in the last fiscal against original estimates of 2.5 per cent.     

For this fiscal, the interim budget projected a deficit of 5.5 per cent of GDP.