PRESENTING the maiden budget of the Narendra Modi-led NDA government, Finance Minister Arun Jaitley on July 10 raised the disinvestment target for the current fiscal to Rs 58,425 crore. This includes Rs 43,425 crore from divesting stake in PSUs and another Rs 15,000 crore from sale of residual stake in the erstwhile government companies, as per the Budget document. This amount is higher than the Rs 51,925 crore PSU stake sale target estimated in the interim budget presented...in February by the UPA government. While a 5 percent stake sale in SAIL is likely, the disinvestment department is also looking at 10 percent stake sale in Coal India. The Cabinet has also decided to sell 5 percent stake in ONGC which could bring about Rs 17,000 crore to the exchequer. Besides, another 10.96 percent stake is likely to be on offer for NHPC and 5 percent each in PFC and REC. Besides, the department is also looking at residual stake sale in Hindustan Zinc and Balco. With boom in the stock markets and Sebi pushing for minimum 25 percent public holding in PSUs, the disinvestment department has revised the target upwards.
As the shares of the PSUs are trading well, it is considered ripe time to sell stakes in these PSUs. Disinvestment proceeds are vital to the exchequer to lower the fiscal deficit. The deficit was at 4.5 percent of GDP in 2013-14 fiscal and targeted to be brought down to 4.1 percent in current fiscal.
Last month, market regulator Sebi said all listed PSUs should achieve a minimum public shareholding of 25 percent within three years.
The decision, aimed at ensuring uniformity among listed entities, would also help the government raise close to Rs 60,000 crore from the sale of shares in around 36 listed PSUs where the public shareholding is less than 25 percent.
As per the current norms, government undertakings should have at least 10 percent public shareholding whereas for non-PSU firms the minimum level is 25 percent.
More funds for PSU banks
With an aim to provide greater autonomy to public sector banks, Finance Minister Arun Jaitley on July 10 said public sector lenders would require Rs 2.40 lakh crore capital by 2018 to meet global Basel III norms. "To be in line with the Basel III norms, there is requirement to infuse Rs 2.40 lakh crore as equity by 2018 in our banks (public sector banks). To meet this huge capital requirement, we need to raise additional resources to fill this obligation," he said in the Budget speech in Parliament.
A large part of this fund would be raised through public offers made to retail customers, he said. "While preserving the public ownership, the capital of these banks would be raised by increasing the shareholding of capital in the phased manner through sale of shares largely through retail common citizen in the country," he said.
The capital of banks will be raised by increasing the shareholding of the people in a phased manner through sale of shares largely through retail to common citizens of the country.
Announcing this in his maiden Budget Speech, the Finance Minister said that there is a requirement to infuse Rs. 240,000 crore as equity by 2018 in the public sector banks. To meet this huge capital requirement, additional resources have to be raised. By selling the shares through retail, the citizens will get direct shareholdings in these banks even as the Government will continue to have majority shareholding. Jaitley said that Government will also examine the proposal to give autonomy to the banks while making them accountable.
In an attempt to create a '"virtuous investment cycle", the Finance Minister proposes that public sector undertakings (PSUs) will invest through capital investment a sum of Rs.2,47,941 crores in the current financial year. Announcing this during his maiden Budget Speech in the Lok Sabha, the Finance Minister said that PSUs will also play their part constructively to give a thrust to investment in the economy." As a part of this bout of investment, metal and mining PSUs SAIL, NMDC and RINL plan to invest Rs 15,069 crore this fiscal towards modernisation and expansion, Rs 700 crore less than the actual outlay for the last financial year, the government said. According to the "broad plan" prepared by the respective firms, Steel Authority of India (SAIL) will spend Rs 9,000 crore in current fiscal, followed by iron ore miner NMDC Rs 4,345 crore and Rashtriya Ispat Nigam (RINL) Rs 1,724.17 crore. The three firms, under the Steel Ministry, had spent Rs 15,769 crore towards modernisation and expansions in 2013-14, Budget documents showed. In 2014-15, SAIL plans to spend Rs 3,300 crore on its Bhilai Steel Plant, as part of its ongoing Rs 72,000 crore modernisation and expansion programme to take its capacity to 24 million tonnes per annum (mtpa) from 14 mtpa now.
Restructuring FCIThe government will give priority to restructuring of state-run Food Corporation of India (FCI) for improving the public distribution system (PDS). "Government is committed to reforms in the food sector. Restructuring FCI, reducing transportation and distribution losses and efficacy of PDS would be taken up on priority," Union Finance Minister Arun Jaitley said in his budget speech. The FCI was set up under the Food Corporation Act, 1964 to fulfil the objectives of the food policy, which are effective price support operations for safeguarding interests of farmers, distribution of food grains throughout the country for public distribution system.