FM to rope in more PSUs for buyback

NEW DELHI, Dec 30: In the wake of the failure of the disinvestment programme, the finance minister is firming up the proposals to prompt ...

NEW DELHI, Dec 30: In the wake of the failure of the disinvestment programme, the finance minister is firming up the proposals to prompt at least six cash rich public sector undertakings to buy back their shares and thus help the government to meet the fiscal deficit target.

The buyback, according to sources, would be funded by the reserves of the companies and if need be with help from the financial institutions. The ministry has also initiated dialogue with the financial institutions to buy government shareholding in the PSUs at a discounted price. In both the cases, the exchequer would be beneficiary at the cost of public sector undertakings.

The other option being considered by the ministry is to franchise identified telecom circles belonging to the department of telecom DOT to the Mahanagar Telephone Nigam Limited MTNL.

The six public sector undertakings being considered for buy back of shares include Indian Oil Corporation IOC, Oil and Natural Gas Corporation ONGC, Gas Authority of IndiaLimited GAIL, National Aluminium Company Nalco, Mahanagar Telephone Nigam and Videsh Sanchar Nigam VSNL.

As part of disinvestment process, government may not be able to mop up more than Rs 600 crore as against the target of Rs 5,000 crore. So far the government has been able to raise only Rs 225 crore by disinvesting shares in the Container Corporation of India Concor. The other three PSUs identified in the budget for disinvestment are VSNL, IOC and GAIL.

With only three months left for the fiscal to end, it is unlikely that the government would be able to force all the three PSUs to hit the domestic or international market. The government will be following the common book building route, as was done in case of Concor, for disinvestment of shares in these companies.

Also the much talked about strategic sale of the public sector was unlikely to take place during the current year. Although the government had appointed merchant bankers to suggest modalities for strategic sale, there report wasstill awaited. In some cases only announcements have been made and the merchant bankers were still waiting for formal communications.

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On the other hand it would be easy for the government to throttle the public sector undertakings and the financial institutions to cough up sums needed for balancing the budget. Some of these identified companies have very good reserve position. For instance IOC has free reserves to the tune of Rs 10,151 crore, ONGC Rs 18,637 crore and GAIL Rs 2292 crore.

It is expected that the buy back coupled with disinvestment through financial institution purchases of the government shares in PSUs might yield Rs 10,000 to the exchequer in the current financial year. The money though would not be able to cover up the failures on the revenue front and fiscal profligacy of the BJP government, would help the finance minister to keep fiscal deficit below 6 per cent of the GDP. The minister, in his budget speech, had promised to bring down the fiscal deficit from 6.1 per cent to 5.6 per centat the end of current financial year.