Govt may tweak rules on use of stake sale funds | delhi | Hindustan Times
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Govt may tweak rules on use of stake sale funds

delhi Updated: Jul 07, 2009 20:02 IST
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India may tweak the rules governing the use of funds obtained from stake sales in state-run firms, a senior official said on Tuesday, as the government explores various means to narrow a bloated fiscal gap.

The cash-strapped government would also look at diluting stakes in already listed state-run firms while bringing in public offers of others in the coming months, the finance ministry official said on conditions of anonymity.

According to the present rules, stake sale proceeds have to be put into a separate National Investment Fund (NIF), managed by professional fund managers, and is not treated like other tax and capital receipts of the government.

The government can only use the interest from the fund for social schemes and restructuring of ailing state-run firms.

"The present NIF architecture needs to be partially or fully abolished," the official said. "Work on that is in process."

Indian markets were rattled on Monday after the budget projected a higher-than-expected fiscal deficit at 6.8 per cent of gross domestic product in 2009/10, without offering clear cut plans on disinvestment and reforms.

However, the finance ministry official said the government was clear in going ahead with stake sales though there was no strategic sale of state-owned firms planned.

Indian ministers have named National Hydroelectric Power Corp, Oil India Ltd, Coal India Ltd, telecoms firm BSNL and national carrier Air India, BHEL and Shipping Corp of India as candidates for disinvestment.

The government plans to raise 11.2 billion rupees in 2009/10 from initial public offers of companies such as Railways subsidiary RITES, Cochin Shipyard, Telecommunications Consultants India, Manganese Ore India, Rashtriya Ispat Nigam and Satluj Jal Vidyut Nigam.

Last week, the economic survey forecast the government could raise 250 billion rupees per annum from stake sales in the coming years.