No to cross holdings

At a time when disinvestment of Rs 40,000 crore for 2011-12 is set to just remain a target, the PMEAC has advised against cross holdings as a desirable option.

“The proposal that was mooted to raise this (Rs 40,000 crore disinvestment) revenue by disinvesting the shares of public enterprises to other cash rich-public enterprises was not a desirable option,” PMEAC chairman C Rangarajan said on Wednesday.

As the government raised just Rs 1,100 crore from disinvestment, and as market conditions remained volatile, the finance ministry worked on other innovative ways, including cross holding by PSUs, to achieve Rs 40,000 crore target.

“This would have only reduced the investible resources of the enterprises and failed to convince market participants – who in any case mark down the reported deficits by all exceptional items, i.e., one-off items such as divestment proceeds and other asset sales, including spectrum auctions,” the Review of the Economy said.

Government could only disinvest Power Finance Corporation, while ONGC stake sale is on radar.

Lacklustre disinvestment is one of the reasons for the deteriorating Centre's financial position.

The PMEAC wanted the government to resume fiscal consolidation process from the next budget itself. At the state level, the think-tank wanted governments to initiate power sector reforms to prevent the gains from fiscal consolidation achieved so far from being frittered away.