The Telegraph
Since 1st March, 1999
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Selloff jitters tighten fists
Expenditure control to help meet deficit target

New Delhi, Sept. 17: The government will launch expenditure-compression measures if the disinvestment target of Rs 13,200 crore is not met and attaining the fiscal deficit of 5.6 per cent proves difficult.

Budget secretary D. Swarup said today the government stood committed to the fiscal deficit target of 5.6 per cent because of the Fiscal Responsibility Act and would take steps to bridge possible shortfalls in the disinvestment target. These could include a slew of measures to control spending and shore up tax collections.

The government has mopped up only Rs 1,100 crore from disinvestment this year, and most of it came from the public offer of Maruti Udyog’s shares. That happened in the first six months. That leaves a gap of about Rs 12,100 crore, which will have to be filled in the next six months.

With the Supreme Court judgement asking the government to go back to Parliament before it divests shares in oil majors BPCL and HPCL and the delay in disinvestment in most PSUs on the block, many feel it will be difficult to meet the disinvestment target for the year.

Finance ministry admits the judgement will have a cost in terms of time. Chief economic advisor to the government, Ashok Lahiri, said one could be impatient, but history tells us that it is better to follow the due process of law. “This is what democracy is all about.”

Swarup pointed out the government had managed to save some Rs 12,000 crore in the last financial year. This had helped it partially cap a ballooning deficit. “If the need arises, we can do it this year as well. We will also try to improve efficiency in tax collections,” he added.

The government has already spent 31.5 per cent of its budgeted expenditure. “Some 40-45 per cent of the expenditure is normally concentrated in the last quarter,” Swarup said. This is the time when the government can tighten its belt if disinvestment is delayed.

As many scratched their heads over ways to deal with the selloff setback, the Centre invited financial bids for privatisation of Hindustan Copper even though it had been nationalised through an act of Parliament.

Bidders have been given a month’s time to submit the bids, along with an earnest money of Rs 5 crore. But with the process subject to legal or legislative measures, the move is being seen as completion of formalities. The government proposes to sell its entire 98 per cent equity in the copper major to a private partner.

Given the legal glitches, the fate of the bidding process for the company, whose Ghatshila unit in the mineral-rich Jharkhand is an attraction, is unclear. The Ghatshila complex on the Bengal-Jharkhand border houses three copper mines and a smelter. The mines are headed for closure, leaving just the smelter in place.

Sources said firms vying for a stake had been intimated of all facts related to the acquisition. The disinvestment ministry had not called off the bids in view of the Supreme Court decision on oil PSUs.

Birla Copper and Sterlite are in the fray for acquiring a controlling stake in HCL, where A F Ferguson has been enlisted as the global adviser.

The government had last year called off its privatisation following a lukewarm response from suitors.

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