Reserve Withdrawals Helped Divestment Ministry Garner Rs 5,000 Crore

The disinvestment ministry is likely to take credit for Rs 5,000 crore receipts from divestment in the current year. While the ministry has garnered a little under Rs 500 crore from the sale of public sector units so far this year, it is has garnered around Rs 3,000 crore by the way of the reserve withdrawal and financial restructuring in various public sector units. It has also sold three properties in the second tranche of Indian Tourism Development Corporation (ITDC) hotels for around Rs 120 crore.

Disinvestment ministry officials argue that the unusually high level of reserve withdrawal was done as the companies were slated for disinvestment. Therefore, they are taking credit for the additional money which the government has garnered.

The budgetary target for disinvestment proceeds in 2001-02 was Rs 12,000 crore, which means that the government will still face a shortfall of Rs 7,000 crore.

The fiscal deficit for the year is, however, unlikely to benefit to any great extent by the relatively better performance of disinvestment this year. In the budgetary accounts, dividend withdrawals are treated as non-tax revenue for the government and are unlikely to be counted as disinvestment receipts. Only money which comes in from sale of government equity in public sector units or via financial restructuring of such companies is considered as coming in from disinvestment.

The disinvestment ministry has already taken credit for around Rs 3,500 crore from sale of units, financial restructuring and reserve withdrawal so far this year, say officials.

In addition, the it expects to finalise sale of IBP, Videsh Sanchar Nigam Ltd and Indian Petrochemicals Corporation Ltd in February. While financial bids for IBP will be called on 31 January, bids for Videsh Sanchar Nigam Ltd (VSNL) are likely to be called on 1 February.

While the government is banking on IBP and VSNL to get in a major portion of the disinvestment proceeds for the remainder of the year, it also expects to get in some funds from sale of Maruti, Hindustan Zinc, Jessop, NEPA and Bharat Heavy Plates and Vessels.

Last year, the government had managed to realise only Rs 2,600 crore from disinvestment, as against a target of Rs 10,000 crore. While Rs 550 crore had come from sale of government equity in Bharat Aluminium Company, the remaining had come from restructuring in public sector oil companies.