The Telegraph
Since 1st March, 1999
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Special kitty for selloff cash

New Delhi, Jan. 27: The government today cleared a proposal to set up a national investment fund that will hold the proceeds from the sale of public sector undertakings next fiscal, while deferring a decision on selling its equity in Maruti Udyog and Bharat Heavy Electricals Limited (Bhel).

The cabinet committee on economic affairs (CCEA) has decided that the fund will come into effect from April and the money will be spent on social sector schemes and recapitalisation of public sector units.

'Public sector fund managers will manage and invest the earnings from divestment in public sector units. These returns will then be invested in social sectors like education, health and employment generation and for the revival of sick PSUs,' finance minister P. Chidambaram told reporters.

He said the issue of divestment in Bhel was also on the agenda but could not be taken up as the discussion on the formation of a national investment fund took a lot of time.

Chidambaram said: 'The creation of the fund was discussed with the Left. The fund has their support. No cases of divestment were taken up, but possible candidates were discussed. Bhel is among them. The fund will be initially managed by public sector entities like LIC Mutual Fund, UTI Mutual Fund and SBI Mutual Fund.'

Chidambaram said: 'The NDA government used divestment proceeds for current expenditure. The proposal (of the UPA regime) is that selloff proceeds will go to the investment fund and be treated as capital receipts.'

When in the Opposition, the Congress and other UPA allies had objected to the selloff programme of the NDA regime as it was using the proceeds to bridge the yawning fiscal deficit.

Explaining the financial implications of the proposed fund, Chidambaram said the proceeds from divestment are treated as capital receipts and when they are spent, they become revenue expenditure. However, the proposed fund would ensure that selloff proceeds are retained as capital receipts. He said there was agreement over the issue, which was part of the common minimum programme.

Earlier this week, Chidambaram and heavy industries minister Santosh Mohan Dev discussed the possibility of selling 10 per cent of the government's equity in Bhel and 7.5 per cent in Maruti Udyog during the next financial year. This would have helped the Centre raise close to Rs 2,500 crore.

After the sale of 10 per cent, the government's holding will come down to 57 per cent in Bhel and 10.74 per cent in Maruti. At present, the government owns 18.24 per cent of Maruti Udyog.

Unlisted profitable units

The CCEA today gave an in-principle approval for listing of unlisted profitable public sector companies with a net worth of more than Rs 200 crore.

The CCEA also approved the sale of the government's minority shareholding in profitable PSUs in conjunction with a public issue of fresh equity by the public sector enterprise concerned or independently by the government.

'In both the situations, a condition has been set that in no case should government equity in these companies fall below 51 per cent and management control go out of its hands,' Chidambaram said after the meeting.

Each listing or divestment case will be prepared in consultation with the administrative ministry concerned.

Firm proposals will again be placed before the CCEA for approval following which a group of ministers will take a final decision on the price band.

ECL project

The government today approved the foreclosure of Eastern Coal Fields' Kondtadih project, which has been a subject of litigation, after capital expenditure of Rs 378.52 crore and to ask the Planning Commission to carefully plan projects of such kind.

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