Email
Print
ShareNew Delhi: The UPA government has decided to list all profit-making public sector companies on the stock market as part of its efforts to fund burgeoning social sector schemes and bridging the huge budgetary deficit.
There are over 100 public sector companies that make profits, including giant companies like Bharat Sanchar Nigam Ltd (BSNL) and Coal India. The disinvestment plan cleared by the cabinet committee on economic affairs on Thursday also calls for a minimum 10% listing for all companies already quoted on the stock markets. The CCEA meeting was chaired by prime minister Manmohan Singh.
The key policy change relates to a decision to deploy the money raised from such disinvestments directly in social sector schemes. Under the previous policy, the proceeds went into the National Investment Fund (NIF), which was set up to appease the Left, which provided support to the first UPA government in 2004. Under the original plan, 75% of the earnings of the fund were to be used for social sector schemes and the balance for capital investment in profitable or revivable public sector companies.
Using the funds directly to pay for social sector schemes in health and education means that the regular budgetary provisions for such schemes can be reduced, enabling a reduction in the fiscal deficit. The fiscal deficit projected in the 2009-10 budget was more than Rs4,00,000 crore.
A government note issued after the CCEA meeting said that the funds would be routed through the NIF. But home minister P Chidambaram, who briefed newspersons, contradicted that and said that the funds would be used directly for social sector projects between April 2009, and March 2012. "Because of fiscal constraints, a special dispensation is being made for three years to directly channelise the money into capital expenditure for the social sector."
The disinvestment plan was first sketched out in president Pratibha Patil's address to the joint session of Parliament after the UPA regime was returned to power earlier this year.
Subsequently, finance minister Pranab Mukherjee had mentioned disinvestment in his Union budget speech in July.
Sugar-coating the decision taken by the CCEA, a government statement said on Thursday that public sector undertakings belonged to the nation, and a part of the wealth should rest in the hands of the people. The government would, however, retain 51% in all public sector companies.
There are many listed public sector companies that have public shareholdings below 10%. These include the National Mineral Development Corporation (1.62%) and MMTC (0.67%). According to norms set by the Securities and Exchange Board of India (Sebi), listed firms must have a minimum of 10% outstanding public ownership.
However, no deadline has been set for profitable public sector companies to get listed on the stock exchanges. Chidambaram said companies with at least a three-year profit record would enter the market at an "appropriate time". There are more than 40 public sector units already listed in the country.
Chidambaram said the social schemes to be funded by fresh disinvestment proceeds would be as per the recommendations of the Planning Commission and the department of expenditure in the finance ministry.
Recently, the government offloaded its stake in Oil India Ltd and NHPC. Other public sector companies, including NTPC, Sutluj Jal Vidyut Nigam and Rural Electrification Corporation (REC) have been identified for disinvestment. The government raised Rs2,013 crore by divesting shares in NHPC and Rs2,247 crore in the case of Oil India Ltd (OIL).
Some months ago, the finance ministry had floated a discussion paper, underlining the need for defining 'public'. For a company to be listed and continue to be listed, it must have a public stake of 25%, said the paper. It also spoke of enforcement action, including delisting, if the public holding was not maintained at 25% in listed entities. It had also mentioned that the powers of the stock exchanges and Sebi to relax listing requirements may be withdrawn.
The finance minister, in his budget speech, prepared the ground for a change in the disinvestment policy by pointing out that the average public float in listed Indian companies was less than 15%, and that at such low levels prices could be manipulated. He also said that the minimum float requirement should be applied uniformly to private and public sector companies.
