Nov 10, 1999|
Government considers options to meet disinvestment target
The government has taken credit for Rs 100 bn, under the head disinvestment proceeds, in its budget calculations for FY00. With tax collections falling short of target, the pressure on the fiscal deficit is apparent. In the wake of the deteriorating fiscal situation, the government is considering several proposals to ensure that the target for disinvestment is met.
According to newspaper reports, the government is examining three options to achieve its disinvestment target:
- Transfer bulk holdings to the financial institutions (FIs) with the option of selling back the shares at a later date
- Outright sale to FIs, who could then offload the shares in the market
- Periodically transfer shares to the FIs, which divest the shares at an appropriate time. In return they would be paid service charges.
The move, whatever form it takes, is likely to be akin to measures taken in the previous year when public sector units were forced to pick up equity (government's share) in each other. As a result of this, the government was able to raise funds even as the equity remained with the public sector.
These measures are aimed at window-dressing the central government's balance sheet. This is so because the FIs are anyway majority owned by the government. Moreover, what is need is an infusion of fresh resources in the PSUs. This can come only when strategic investors pick up stakes in the PSU.
The government's measures are short sighted. They are aimed at raising resources for the government without giving due consideration to the future of the public sector units. They should infact aim at a rejuvenation of the public sector by inviting new management and at the same time raising resources for the government. Only when these objectives are met, will the disinvestment process be termed as a success.
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