Govt sets ambitious selloff target for 2002-'03

P Vaidyanathan Iyer

The Centre has set an ambitious divestment receipts target of Rs 150 billion for 2002-03 and has simultaneously proposed the creation of a special purpose vehicle for managing the divestment proceeds. The Rs 150-billion Budget estimates for the next fiscal represents a 25 per cent increase from the BE in 2001-02.

According to senior government officials, the creation of an SPV will ensure that the divestment proceeds are specifically utilised to ensure a safety net for workers of public sector undertakings that are put on the block.

The proceeds will also be used to turn around sick PSUs, recapitalise some of them and enhance their competitiveness to get a better value at the time of sale.

Officials said it was being debated whether the SPV should be delinked from the Consolidated Fund of India. This would mean that divestment proceeds would not be part of the overall receipts in the government's Budget.

The divestment process, which picked pace in the second half this year, encouraged the government to set such a target. The ministry of divestment has so far mopped up over Rs 50 billion through sale of government equity in companies like Videsh Sanchar Nigam Ltd, IBP, CMC and HTL.

Ahead of the sale, the government also withdrew reserves to the tune of Rs 22.50 billion from VSNL via special dividends and dividend tax.

In the current fiscal, the divestment ministry also hopes to complete the proposed rights issue in Maruti Udyog Ltd and the sale of government stake in Indian Oil Corporation.

Government sources said the ministry expected to show receipts of almost Rs 75-80 billion against the target of Rs 120 billion for the full year.

With the process having already gathered steam, the government feels that the Rs 150-billion target for the next year would not be too difficult to achieve. It has lined up 30 companies for divestment in the next fiscal, a sharp increase from the 13 companies targeted this year.

These include big-ticket public sector units like HPCL, BPCL, MTNL and Shipping Corporation.

Some of the other companies are Concor, RITES and Hindustan Copper Ltd. The finance ministry had in the 2001-02 budget earmarked Rs 50 billion of the divestment proceeds for Plan expenditure.

Subsequently, it also considered a proposal of the Planning Commission to create a non-lapsable pool for divestment proceeds, which would perhaps be utilised for expenditure in social sectors like education and health.

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