National Investment Fund to be launched today

New Delhi, October 5: The national investment fund comprising proceeds from disinvestment of public sector units will come into existence from Saturday, more than two years after the Government approved its creation.

Finance Minister P Chidambaram will witness the signing of pacts with Unit Trust of India, Life Insurance Corporation of India and the State Bank of India where it would be ensured that the three invest the monies collected from sale of Government shares in state-run companies into mutual fund, and generate income for use in social sector programmes.

The scheme comes into being after remaining dormant since January 2005, when the Cabinet Committee on Economic Affairs approved it, thanks to collection from the sale of Government equity in National Hydroelectric Power Corp, Power Finance Corp and PowerGrid Corporation of India where the government sold five per cent of its shares.

Initially, the Disinvestment Ministry had expected to kickstart the fund with proceeds from share sale in Maruti Udyog. But that did not come through as MUL, in which the government sold 8 per cent equity to raise Rs 1,567 crore, was no longer state-run as the government was holding 18.2 per cent before the stake sale. Its proceeds had to be diverted to the Consolidated Fund of India.

With the NIF, the government would create a “non-depleting fund” which would be managed by the three mutual funds through investment in capital markets to generate income. While 75 per cent of the income would be spent on social sector projects of education, healthcare and employment, the balance 25 per cent would be utilised for the revival of sick state-run companies, a longstanding demand of the UPA Government’s Left allies.

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