Mukherjee: Initiating talks

New Delhi, July 14: The UPA government today promised more action in divestment, raising hopes that collections on this account would be far in excess of Rs 1,120 crore announced in the budget.

Finance minister Pranab Mukherjee told the Lok Sabha during a debate on the budget that his ministry was trying to identify PSUs whose stakes could be offloaded.

He reaffirmed the government’s determination to avoid monetising the huge fiscal deficit, meaning the government would not meet its expenses by printing money.

“My ministry has initiated the discussions for identifying these undertakings (for divestment). Details will be announced in due course,” Mukherjee said.

Upstream firm Oil India and hydel power producer NHPC, which have already received permission, are expected to hit the market with their maiden offers in August-September. However, the government will continue to hold at least 51 per cent in the PSUs.

Finance ministry officials said talks had been held with coal, mining and telecom ministry officials to identify the PSUs for stake dilution.

The government plans to divest 10 per cent initially in those firms where it has 100 per cent holding.

Sources said selloffs might happen in Bharat Sanchar Nigam Limited, Coal India Limited and ore producer NMDC Limited.

Mukherjee said the economy was showing early signs of recovery and argued that a wider budget deficit “right now” was critical for growth. Fiscal deficit in Budget 2009-10 has shot up to 6.8 per cent of the gross domestic product, and government borrowings are estimated at a massive Rs 4,50,000 crore.

“Some of the positive signs in the Indian economy are a 13 per cent growth in steel production, a 13.1 per cent growth in cement output, and a growth of 14.3 per cent in the automobile sector, driven by a 17.4 per cent increase in the demand for two-wheelers,” Mukherjee said.

He said the borrowing and high fiscal deficit were “risks that we have taken with the hope that the economy will turn around”.

The increase in deficit will not “elbow out” the borrowing needs of private firms. The government is “working in tandem” with the RBI to ensure enough money is available, the finance minister said.

Mukherjee’s upbeat stance was one of the factors that fuelled the stock rally on Dalal Street today. The sensex jumped 453 points, the biggest gain since June 9.