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Monday, November 16, 2009

Govt outlines rationale behind PSU disinvestment

Disinvestment Secretary, Sunil Mitra on Friday explained the Government's thinking on the proposed action plan for disinvestment of its equity in profit making Central PSUs in a media briefing held in New Delhi. The Government had approved the plan on November 5. He said that the proposal to list PSUs is aimed at unlocking greater shareholder value in them. Availability of good quality PSU shares for trading provides depth and liquidity to the market that has a stabilizing influence, Mitra said.

Direct “people ownership” effectively enables public to share the prosperity of PSUs while indirect “people ownership” is achieved through Mutual Funds and Insurance Companies’ participation in Public Offerings, Mitra said. The Department of Disinvestment will begin Inter-Ministerial consultations to identify PSUs for disinvestment.

In view of the deceleration of GDP growth due to global economic downturn coupled with the drought, the Centre could find it tough to raise the required budgetary resources. "To ensure this does not negatively impact the growth of the Indian economy, the Government has approved one-time exemption permitting full utilisation of disinvestment proceeds deposited in the NIF, over the current fiscal year and the next two financial years, in meeting the capital expenditure requirements of selected social sector programmes," Mitra said.

"The unlocking of the dormant wealth of our PSUs and their channelisation for capital expenditure in social sector schemes, will stimulate economic growth with benefits percolating to the masses," Mitra said in a statement.

The Centre has decided that all profitable listed central PSUs should meet the mandatory listing of 10% public ownership. In addition, all unlisted PSUs having positive networth, no accumulated losses and having a net profit in the three preceding consecutive years should get listed on the stock exchanges. The disinvestment proceeds would be channelised into the National Investment Fund (NIF). The corpus comprising deposits from April 2009 till March 2012 would be available in full for investment as capital expenditure in specific social sector schemes. The status quo ante of NIF will be restored from April 2012

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