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Find your own money, govt tells PSUs

The finance ministry has asked all public sector companies to raise funds by listing on stock exchanges instead of depending on government finances, in a clear message that state-owned companies should not knock the government’s doors to fund their capacity expansion and other expenses.

business Updated: May 17, 2012 00:38 IST
HT Correspondent

The finance ministry has asked all public sector companies to raise funds by listing on stock exchanges instead of depending on government finances, in a clear message that state-owned companies should not knock the government’s doors to fund their capacity expansion and other expenses.

“Financial advisers, who are on the board of central public sector enterprises (CPSEs), are requested to emphasise the benefits of listing,” the expenditure department said in an office memorandum to all ministries and departments.

“Further, financial advisers are requested to advise the CPSEs that consequent to the listing such companies would be better able to tap the capital market for capital expenditure requirements instead of depending on government finances,” the memorandum, issued last Friday, said.

On Tuesday, the government said it was open to getting more state-owned companies listed on stock exchanges once equity market conditions become less volatile. http://www.hindustantimes.com/Images/Popup/2012/5/17-05-biz-03.jpg

“The stock market sentiment is being not what it is. I think there is a slowdown in the disinvestment process. As and when the market sentiment improves, more and more PSUs will be offered for a partial disinvestment,” Praful Patel, minister of heavy industries and public enterprises, said after releasing the National Survey on State-Level Public Enterprises 2007-08.

The latest finance ministry’s internal memorandum to all ministries is seen is an attempt by the government to slash expenditure and prevent fiscal deficit from ballooning beyond the budget levels.

At Rs 513,590 crore, or 5.1% of GDP, high fiscal deficit and a heavy government debt burden remain India’s key worries. A further rise in expenditure will reduce the government’s elbow room to borrow and spend its way out of a crisis.

The government has set a target of Rs 30,000 crore that it expects to earn by selling equity in state-owned companies in 2012-13. The higher target is despite the fact that it missed the target for the last fiscal by a wide margin. It raised raised only Rs 14,000 crore against a target of Rs 40,000 crore.