The government on Thursday said it would pursue disinvestment of state-owned companies, but ruled out ceding majority control.
The stand by the United Progressive Alliance government reflects what the Congress stated in its election manifesto of selling minority stakes in public sector enterprises but with a ceiling that government equity does not fall below 51 per cent.
"Our fellow citizens have every right to own part of the shares of public sector companies, while the government retains majority shareholding and control," said President Pratibha Patil in her address to the joint session of 15th Lok Sabha.
With tax collections slowing down because of the global economic crisis, the government is looking at non-tax receipts like disinvestment to plug the widening fiscal deficit gap, which last fiscal crossed 6 per cent of the gross domestic product.
"The government," she said, "will develop a roadmap for listing and people ownership of public sector undertakings while ensuring that government equity does not fall below 51 per cent."
Thus, strategic sale that will reduce the government stake to 26 per cent and below is ruled out by the Congress-led alliance.
But the government can raise significant resources by selling a minority stake of 10 per cent in state-run firms. The Centre can earn at least Rs 37,000 crore (Rs 370 billion) by selling up to a 10 per cent stake in the top 10 PSUs in which it owns over 90 per cent.
One of the things the road map will have to address is the issue of using the disinvestment proceeds. At present, money from selling government equity is transferred to the National Investment Fund, which now has a corpus in excess of Rs 1,800 crore (Rs 18 billion). The income earned from the fund is used towards social sector expenditure.
If the money is be diverted from the NIF, the Cabinet has to take the decision authorising the same. Such a move would help the government to fill the fiscal gap.
