FinMin to float ETF for PSUs stake sale

* DoD in talks with stakeholders; to finalise CCEA note by month-end

In a strategy aimed at reviving the capital markets and long-stalled disinvestment agenda,the finance ministry has decided to go ahead with a proposal to set up an exchange traded fund (ETF) for selling stakes in state-owned firms.

The proposal was originally floated at the time when the finance ministry was headed by Pranab Mukherjee,but later,with no full-time minister in charge of the ministry,it was put in cold storage.

Newly appointed finance minister P Chidambaram has now indicated willingness for the proposal although a formal clearance is yet to be sought,a senior government official said.

The Department of Disinvestment is in talks with stakeholders and investment bankers to elicit their interest and has also floated a concept note before giving a final shape to the proposal. After some more rounds of talks with bankers and investors,we are likely to begin working on a note for the Cabinet Committee on Economic Affairs by the month end, the official said.

According to the proposal,the ETF would have a corpus of about 5,000 crore. The department of disinvestment is planning to model the fund on the lines of the Hong Kong Tracker Fund and is also in the process of identifying public sector firms which can be a part of the fund. An ETF is an investment fund,which is traded on the bourses like shares,and be bench marked to an index on the stock exchange.

The ETF is expected to help meet its Rs 30,000 crore target from stake sale proceeds,and will be an additional means for disinvestment after the recently started offer for sale and institutional placement programme.

Disinvestment proceeds are expected to be a key to funding the fiscal deficit of 5.1 per cent in 2012-13,though the government has been unable to launch any public offers due to the volatile markets.

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Even last fiscal,the department of disinvestment could raise only Rs 14,000 crore against a target of Rs 40,000 crore. This year,it has lined 15 companies,including Oil India Limited,NMDC Ltd,Hindustan Copper Ltd,Hindustan Aeronautics Ltd as well as Neyveli Lignite Corporation Ltd for stake sales,according to a list prepared by the finance ministry.

MFs likely to be included in RGESS

The finance ministry is likely to include mutual funds within the Rajiv Gandhi Equity Savings Scheme. Based on recommendations by the Sebi board,finance minister P Chidambaram had suggested the inclusion of mutual funds in the RGESS as a means to popularise them. The ministry is looking at the contours of the scheme anew. It is expected to be notified by next month, a person close to the development said.

The ministry is also likely to cut down the lock-in period for the scheme to one year from the earlier proposal of three years.

Announced in Budget 2012-13,the RGESS is aimed at encouraging retail investment into equities through income-tax deduction of 50 per cent for investments up to Rs 50,000.