New Delhi, July 26: The Congress-led government is putting its plan to dismantle the National Investment Fund on the back burner. The fund is a corpus formed from the governments selloff proceeds.
It fears its ally Trinamul Congress will neither support any wholesale dismantling of the fund nor any aggressive divestment programme.
Earlier, finance secretary Ashok Chawla had told newspersons that the government would come up with a proposal before the cabinet committee on economic affairs (CCEA) on whether proceeds from disinvestment will be ploughed into the NIF (National Investment Fund), or wholly appropriated for direct spending in social welfare schemes.
Current rules stipulate only the use of the interest earnings from the funds for social welfare.
However, officials said that their assessments had revealed that the UPA could face difficulties in pushing such a proposal through the CCEA, of which Trinamul chief Mamata Banerjee is a member. The Bengal firebrand had created a piquant situation last week when she almost walked out of a cabinet meeting over a rural development ministry proposal to allow state governments to acquire up to 30 per cent of land for private projects.
Trinamul sources said their leader had made it clear to them that she would not allow unreasonable or anti-worker measures to be cleared by the cabinet. However, they added, the party supremo would not act in an unreasonable manner to rational proposals on PSU divestment such as the sale of small stakes to the public.
The Congress-led government was looking at the possibility of turning the NIF into a pass-through fund, which would allow it to spend the proceeds directly on social sector projects instead of using just the interest from the fund. The Trinamul Congress has not officially taken a stand on this issue, but the sources said the proposal would be scrutinised before being allowed. There should not be any attempt to sell family silver to pay for today's expense, they said.
Consequently, the government may not face any problem if it allows NHPC Limited and Oil India Limited to issue fresh shares or piggybacks on these offers to sell minority stakes in them.
However, there will be difficulties if it pursues an aggressive divestment programme not only the Trinamul but also Tamil Nadus DMK, which has a large labour constituency, will oppose such a move.
The Left and the DMK had held up the divestment process in the last government, even stopping limited attempts to list profitable PSUs and allow other state-run entities to undertake follow-on public offers.
Funds garnered through the sale PSU stakes have to be currently ploughed into the National Investment Fund, which now has a mere Rs 994 crore.
However, if the CCEA allowed the government to take the money earned from divestment for direct use in social sector projects or to treat the NIF as a pass-through fund whose corpus could be ploughed into social projects, it would help the government to balance its books somewhat better.
Fiscal deficit this year is a record Rs 400,996 crore, or 6.8 per cent of GDP. Similarly, an aggressive flogging of PSU stakes no longer seems to be an easy move.
In all, officials say they aim to garner about Rs 10,000 crore from small stake sales in the current financial year.
Other PSUs where the government was considering sales included Manganese Ore (India) Limited, NMDC Limited, Hindustan Fertilizer Corporation Limited, The Fertilizer Corporation of India, BSNL, Bharat Heavy Electricals Limited and Coal India Ltd.