Posting in full because it has some vital info. on what is probably the most effective way of reducing Fiscal deficiat.
Selloff parade may fetch Rs 30,000 cr in 2010-11 THE government plans to raise about Rs 30,000 crore next financial year from stake sale in public sector firms to meet a significant part of the revenue shortfall, as it looks to bring down fiscal deficit from the 16-year high of 6.8% recorded this year.
The disinvestment department is currently working on its provisional estimates. The final figure will be sent to the finance ministry, which is preparing the Budget for 2010-11. The proposal envisages divestment of stakes in 12-15 firms in the forthcoming year. “We are suggesting a target of Rs 30,000 crore for the next fiscal,” said an official with the department.
The divestment target for next year is lower than the Rs 32,569 crore, expected to be raised this year. The year to March 2010 is seen as the best year for the government in terms of divestment proceeds.
While a final list of PSUs that will hit the market next fiscal year will be compiled only by March, the department is already firming up plans to divest stakes in Steel Authority of India (SAIL), Hindustan Copper, Manganese Ore India (MOIL) and MMTC.
Sale of stakes in SAIL and MMTC is expected to bring big money to the government, while Hindustan Copper and MOIL are expected to fetch between Rs 2,000 crore and Rs 3,000 crore.
“Ideally, only one PSU should hit the markets every month. The follow-on and initial public offers need to be spaced in such a manner that there is enough investor appetite,” the official said, requesting anonymity.
The government has already decided to defer the initial offer of Satluj Jal Vidyut Nigam to late April or early May to avoid a glut in the market. A 10% stake sale in the company is expected to fetch the government Rs 1,200 crore.
While the disinvestment department wants the government to divest its stake in the stateowned telco BSNL in the coming fiscal, it is as yet unclear whether the plan will actually fructify. Coal India is another company that could come to the market next year. The government is banking heavily on disinvestment proceeds for financing its fiscal deficit in 2010-11.
PSU IPOs fetch Rs 4,260 crore
THOUGH finance minister Pranab Mukherjee had estimated that the fiscal deficit would be reduced to 5.5% of the GDP this financial year, indications are that it could be a little higher than his estimate. The government is worried about the fiscal deficit, the amount it needs to borrow to meet excess of expenditure over its receipts, as high borrowings next year could crowd the market for funds, pushing interest rates higher.
The country’s GDP grew 6.7% in 2008-09 after recording 9%- plus growth in the three preceding years. Three stimulus packages announced by the government put the economy back on track, but pushed fiscal deficit to record levels. Barclays Capital had, in a recent report, projected that the government could earn Rs 25,000 crore next fiscal from divestments in BSNL, PowerGrid, SAIL and MMTC.
“There is an increased momentum in announcements of equity offerings in public sector units, which suggests upside risks to our estimate of fiscal divestment proceeds of Rs 25,000 crore in the next fiscal,” the report had said. The Economic Survey for 2008-09 had suggested that the government should sell a minimum 10% stake in all unlisted public sector units (PSUs), but kept disinvestment target at just Rs 25,000 crore every year.
The 2009-10 Budget had estimated that disinvestment proceeds would fetch around Rs 1,120 crore. But the government has earned Rs 4,260 crore from initial public offers of NHPC and Oil India. The recent follow-on public offer (FPO) of National Thermal Power Corporation (NTPC) is expected to bring the government at least Rs 8,300 crore. The other two remaining FPOs in the fiscal — Rural Electrification Corporation and NMDC — are likely to bring in another Rs 20,000 crore. India’s stalled disinvestment programme got a fresh lease of life with the Congress-led UPA government getting a clear mandate in the 2009 parliamentary elections. Privatisations were rife under the BJP-led government before the Congress-led UPA came to power in 2004, but was put in deep freeze in the past five years, as its then allies, the Left parties, were opposed to the idea.
Consequently, in the five years preceding the current one, the government raised just Rs 13,287 crore from disinvestment as against Rs 28,000 crore raised by the BJP-led government in the preceding five-year period. A sum of Rs 38,795 crore was billed as disinvestment receipts in the 2007-08 Budget. This was largely on account of a book transfer of stake in SBI from RBI to the government. http://epaper.timesofindia.com/Daily/sk ... ult&pub=ET