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Divestment target raised to Rs 120 billion

BS Bureau

The government has raised its divestment target to Rs 120 billion (budget estimates) for the next fiscal. It expects to raise the money by selling government equity in big ticket companies like Videsh Sanchar Nigam Limited, Air India and Maruti Udyog Limited, among others.

In 2000-01, the government realised only Rs 25 billion (revised estimates), or 25 per cent of it's divestment target of Rs 100 billion. This time however, higher realisations seem likely as the government expects to complete the sale process in 27 companies within the year.

Reiterating the government's seriousness on divestment, Finance Minister Yashwant Sinha said that it would, "accelerate the privatisation programme and place emphasis on restructuring of public enterprises".

In addition, it has, "approved privatisation of 27 companies in which the process of divestment is expected to be completed during the course of the year," he said while delivering the budget speech for 2001-02.

In an attempt to build some support for the divestment programme, Sinha on Wednesday announced that receipts from the process would be used to set up social infrastructure like primary schools, healthcare centres and roads.

Besides these, the funds will also be used for restructuring of public sector units, offering voluntary retirement to workers and retiring public debt.

While this announcement is the same as that made in last year's budget speech, this time round, Sinha has specified that of the Rs 120 billion, which the government expects to get from the dinvestment programme, around 58 per cent, or Rs 70 billion have been earmarked for providing funds for restructuring of PSUs.

In addition, some of these receipts will be used for providing a safety net to workers, including funds for voluntary retirement schemes and also for reduction of the government's debt burden. Money for VRS for workers in government enterprises has hitherto been provided from the National Renewal Fund and by the administrative ministries in charge of these units.

The allocation of the remaining Rs 5000, which is about 42 per cent of expected divestment receipts, for social sector investment is however subject to realisation. If the government manages to raise this money, it would be allocated to plan schemes in areas like primary education, primary healthcare, roads and housing.

Detailed sectoral allocation proposals will be finalised in consultation with the Planning Commission.

While financial and business restructuring plans for PSU's including Steel Authority of India Limited and Hindustan Machine Tools have been approved during the year, the government has also decided to close down 8 non-viable PSUs.

On public sector, Sinha said that public sector enterprises will have to be strengthened to compete and prosper in the new environment. Since 1998, the government has provided more than Rs 130 billion to 23 PSUs for restructuring, Sinha said.

Source: Business Standard

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