The government had floated a discussion paper last year to increase public shareholding for all listed companies. But it drew strong opposition, saying there is not enough money to accommodate additional share issues by listed companies.
Increasing public shareholding would mean that promoters of firms raising capital through an initial public offer would have to dilute an additional 15 per cent of equity capital.
On the huge new outlays in the Union Budget, Chawla said ministry officials would hold talks with Reserve Bank of India officials on July 17 to manage government borrowing in a "least destructive" manner. "OMO (open market operations) could be upscaled so that we are able to raise the money. Our intention is to reduce the actual borrowing from the market," he said.
On disinvestment, he said the Centre expects Rs 3,000-3,500 crore from sale of government stake in Oil India Ltd and NHPC Ltd by the end of this fiscal. In addition, the finance ministry will soon send a proposal to the Cabinet Committee of Economic Affairs regarding usage of the National Investment Fund, where proceeds from all disinvestments are parked.
"Proceeds from these two will be about Rs 3,000-3,500 crore for the government, apart from whatever is there for the company. There will be IPOs by the companies as well. What additional amount comes (from disinvestment) will depend on which company, how much equity and what time and what price you get," Chawla said in a media interaction.
The budget documents do not mention the expected proceeds the government will earn from disinvestment of these two companies. In 2009-10, earnings from disinvestments have been pegged at Rs 1,120 crore, a contraction of over 56 per cent from the revised estimates of Rs 2,567 crore from 2008-09.
This is because disinvestment proceeds are routed to the NIF and cannot be used for government expenditure. "It is not possible to show it in the annual statement of accounts because they just come and go - like a pass through. Therefore, unless the scheme is changed, in some manner, whatever disinvestment it may be - OIL, NHPC, or otherwise- will not be captured in the annual statement of accounts," Chawla explained.
The ministry proposal to the CCEA, if accepted, will enable the government to use disinvestment proceeds to bridge the widening fiscal deficit, which is estimated at a 16-year high of 6.8 per cent in 2009-10.
NIF was set up by the government in 2005, but became operational only two years earlier. The present guidelines mandate that about three-fourths of the income from NIF could be used to finance social sector schemes, while the rest can be used to meet capital investment requirements of state-run companies, which are making profits.