The Telegraph
Since 1st March, 1999
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Jaswant to lobby for selloff proceeds fund

New Delhi, Jan. 31: Finance minister Jaswant Singh will be taking to the cabinet a proposal to set up the long-promised Disinvestment Proceeds Fund next week. If cleared, this may form one of his key policy announcements to be made with the mini-budget he will place before Parliament on February 3.

Singh’s proposal is for the fund to be managed by his ministry and not Arun Shourie’s department of disinvestment.

He has written to cabinet colleagues seeking their acceptance of a controversial spending plan that wants to earmark 50 per cent of the disinvestment proceeds for public sector restructuring, a quarter of the fund’s earnings in a given year to be used to retire public debt and another quarter to be used in building infrastructure.

Many of his cabinet colleagues are, however, not exactly happy with this. The crux of the conflict is how the money will be spent. Critics within the cabinet say that disinvestment minister Arun Shourie had promised Parliament the proposed fund would “finance fresh employment opportunities and investment besides retiring of public debt”.

By using a hefty portion to fund plan schemes which would build bridges or roads instead, there could be a breach of parliamentary privilege besides giving the Congress-led opposition an opportunity to turn this into an election issue where it could claim that the “country’s assets have been sold off and the money frittered away on normal government expenses”.

Many critics within the BJP would like the money used to fund schemes like safety nets for retrenched PSU worker, provide them loans to set up new businesses or learn fresh skills. These could be sold to urban voters who are believed to be increasingly critical of the disinvestment policy.

“This kind of insensitivity and juggling with promises could be politically problematic for us ... divestment is a burning issue,” sources said.

Even the disinvestment ministry has been planning its programmes on the premise that a totally independent fund was being set up where it would have a say. An earlier understanding was that the disinvestment fund would be managed by an inter-ministerial committee, responsible only to the cabinet and Parliament.

The government’s privatisation drive and attempt to earn mega-bucks out of it has been stalled temporarily because of a judicial review of the process. Analysts expect the disinvestment process to pick up steam next fiscal and reckon a target of Rs 15,000 crore could be easily achieved.

The government had planned to raise Rs 13,200 crore in 2003-04, by selling its stake in public sector companies with a view to reining in the fiscal deficit. Last week, a senior finance ministry official said the privatisation shortfall in the current fiscal was likely to be around Rs 7,000 –8,000 crore.

The stunning shortfall was a result of a Supreme Court ruling some months back that stalled the sale of those state-run firms that had been set up by Parliament or nationalised by the legislature until such time as the government managed to get parliamentary approval for such sales by repealing the acts which set them up or nationalised them.

With the BJP-led government in a minority in the upper house of Parliament, such an approval was difficult and the ruling had created a gridlock for the entire privatisation drive. However, luckily for the government, the apex court is now reviewing its earlier judgment.

Once the apex court decides to allow the government to go ahead with its privatisation programme — something that experts say is “very possible” — the disinvestment ministry has plans to put some 24 firms on the block.

Besides the two oil marketing giants, these include tea and engineering firm Balmer Lawrie, wagon builder Burn Standard, consultancy firm Engineers India, chemicals company Hindustan Organics and a clutch of ITDC hotels.

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