Divestment gets a huge kickstart

As much as Rs 30,000 crore could be available to the government after the Cabinet today made it mandatory for all listed and profitable public sector undertakings....

As much as Rs 30,000 crore could be available to the government after the Cabinet today made it mandatory for all listed and profitable public sector undertakings (PSUs) to have a minimum public float of 10 per cent. And decided to list all unlisted PSUs which made profits during the past three years. In a major policy shift,the Cabinet also decided to mend rules that will allow the government to dip into the disinvestment corpus and fund its ambitious social sector programmes.

The decision to use the money raised from stake sale in PSUs will help the government tide over the immediate crisis on the fiscal front. A high fiscal deficit,estimated at 6.8 per cent of the gross domestic product in 2009-10,had posed huge challenges for the government,forcing it to borrow more from the market,and threatening to undermine the growth prospects in the medium term.

Such a massive divestment of government stake in listed and unlisted PSUs would not only bring huge volumes to the trading activity at stock exchanges,deepen the market and broaden its base but also lend flexibility to the government to continue spending on big-ticket schemes such as National Rural Employment,National Rural Health Mission and Pradhan Mantri Gram Sadak Yojana.

The corpus comprising deposits from April 2009 till March 2012 would be available in full for investment as capital expenditure in specific social sector schemes determined by Planning Commission and Department of Expenditure. The status quo ante of NIF will be restored from April 2012, the official communiqué stated after the Cabinet meeting on Thursday.

Currently,listed PSUs account for a total market capitalisation of Rs 15.77 lakh crore,which is about 30 per cent of the total market cap of listed companies on the Bombay Stock Exchange. There are as many as 100 unlisted PSUs with a positive net worth and making profits in past three consecutive years.

Not only will the government be able to mobilise funds by stake sale in unlisted PSUs,but these PSUs themselves could raise moneys for their own expansions through issue of fresh shares. Some of the unlisted PSUs that can quickly tap the market are Hindustan Aeronautics Limited,Coal India,BSNL,Hindustan Newsprint Limited and NBCC.

But it may not be feasible to list all of these 100 unlisted PSUs since some have a small net-worth of Rs 20-30 crore. Such companies operate in the social sector and would not find many takers for their shares in the market, a senior government official said. ITPO is one such example.

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Of a total of 243 public sector enterprises,217 are operating and 159 make profits. These 159 registered a profit of Rs 91,000 crore in 2007-08,according to government data.

After coming to power for the second term in June this year,the Manmohan Singh government gave clearance to as many as seven public sector enterprises for off-loading promoter stake. The OIL and NHPC initial public offers have already hit the bourses while that of NTPC,SJVNL,EIL,REC and NMDC are on course.

The decision comes as the first official policy statement from the UPA government after the finance minister remained mum on his disinvestment plans in the Union Budget 2009-2010. In its previous stint at the Centre,the Congress-led UPA could not muster support from Left parties to go ahead with its disinvestment plans.