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Divestment funds may be directed to flagship plans

delhi Updated: Oct 08, 2009 01:40 IST
Chetan Chauhan
Chetan Chauhan
Hindustan Times
public sector undertakings

The money that the Central government intends to raise from disinvestments of the public sector undertakings (PSUs) is likely to be used to fund the UPA-2's flagship programmes.

The Union Cabinet on Thursday is expected to consider a proposal made by the finance ministry seeking a one-time waiver of the ban (till March 2012) on spending money from PSUs disinvestments on the social sector schemes.

If approved, this would mean that the money raised through disinvestments -- for which 15 PSUs are already listed-- could be used to manage fiscal deficit. The government has set a target to reduce the fiscal deficit to 5.5 per cent in 2010-11 and 4 per cent in 2011-12 from an estimated level of 6.8 per cent in 2009-10.

In January 2005, the Cabinet had decided to park the money raised from disinvestments in the National Investment Fund (NIF), which is not part of the budget. The Rs 18,000 crore (Rs 180 billion) in the fund cannot be used for any programmes listed in the budget.

This was done after the NDA government (in power till 2004) was criticised for selling shares of PSUs to manage fiscal deficit.

With the government earning from taxes going down, the finance ministry has sought permission to allow money from the NIF to finance 15 programmes.