PSUs unlikely to receive any budgetary support

In its effort to devise new ways to raise resources in order to fund its mega social sector programmes...

In its effort to devise new ways to raise resources in order to fund its mega social sector programmes,the UPA government is unlikely to extend any budgetary support to state-run companies,instead pushing for their divestment to mobilise resources.

Budgetary support of Rs 635.08 crore extended to public sector units(PSUs) in the Interim Budget as part of non-plan expenditure could in effect be the last. The support given to PSUs in Budget 2008-09 was Rs 744.32 crore. Since the focus is on ensuring funds for the flagship programmes,there is an obvious need for garnering resources. So divesting stake in listed and to-be listed PSUs is a more viable proposition, sources said.

Prime Minister Manmohan Singh had earlier said the finance minister would tackle the issue of disinvestment of PSUs in the Budget. However,President Pratibha Patil,in her address to the joint session of Parliament,had said while the government intended to disinvest,it would retain at least 51 per cent stake in PSUs.

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Currently,41 state-run units are listed and a host of companies including BSNL,RITES,National Aviation Company,and Ircon are awaiting government nod for disinvestment. The government has already cleared the disinvestment of NHPC and Oil India,but could not tap the capital market due to the prevalent negative sentiment.

NHPC and Oil India could be the first two PSUs that are disinvested. Fund mobilisation by way of initial public offers (IPOs) declined in 2008. Only Rural Electrification Corporation,worth Rs 1,421 crore,had an IPO .

When the Sensex was hovering around 5,500 points in 2003-04,the government could raise Rs 14,000 through divestments. With the benchmark index hovering above the 14,000-mark now,the government can think of raising amounts upwards of Rs 22,000 crore,sources said.

Proceeds from divestment would be a welcome revenue stream,which could lessen the governments market borrowing need. The money earned from disinvestments could also be used by the PSUs to lessen burdens arising due to enhanced production costs and increased wage bill arrears following the sixth pay commission recommendations.