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PSU Disinvestment: Will it be successful?

Jul 7, 1999

The Cabinet Committee on Disinvestment has cleared the sell-off of stakes in 9 public sector undertakings in order to raise Rs 100 bn. The companies include Madras Fertilizers (6.74% of equity), MTNL (5%), Indian Oil (5%), Hindustan Latex (49%), ITDC (74%), Hindustan Zinc (25%), Central Electronics (10%), GAIL (2.1%), and VSNL (1%). There are however fears whether the government would not be able to meet such a steep target. Last year, the government resorted to the unpopular method of cross holdings in the public sector to meet its target. This year too it might resort to such a measure, given that it has yet to start the process of disinvestment for the current year.

The Finance Bill for FY2000 has taken a credit of Rs 100 bn from the proceeds of disinvestment. Incase the government is unable to meet its target, the cash flows of the government would come under pressure and the fiscal deficit could enlarge.

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