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According to a study prepared by Assocham, by disinvesting up to 51% stake in 45 public sector companies (PSUs), the government may be able to raise around Rs 4 lakh crore from sectors such as power, metal, banking, engineering, oil and other miscellaneous businesses. This could reduce the fiscal deficit by around over 90%. The study was recently submitted to Prime Minister Manmohan Singh and UPA chairperson Sonia Gandhi.

The study takes into account 20 PSU banks, seven oil companies, four engineering companies, four metal companies, four power companies and six miscellaneous businesses, dilution of up to 51% stake could collectively accrue the government a whopping Rs 4 lakh crore.

The power sector, with an average government stake of 86.87%, can alone fetch around Rs 99 lakh through up to 51% stake dilution. Some of the power companies such as NTPC, Power Finance Corporation, Power Grid Corporation of India and Rural Electrification Corporation, upon divestment, can cover around 24.7% of the fiscal deficit.

The maximum government stake of 94.67% is in the metal sector, which can generate around Rs 97 lakh upon divestment.

The report further states that almost 80% of the central plans, which include agriculture & allied activities, rural development, irrigation & flood control, energy industry & mineral, transport, communication, science & technology, general economic services, social services and other general services can be easily financed by the collected amount and the budgetary deficit can be reduced substantially.

According to Dr Rajiv Kumar, director and chief executive at Indian Council for Research on International Economic Relations (ICRIER), the government shouldn’t touch those PSUs, which have made a mark for themselves in the domestic and global markets.

“If it isn’t broke then don’t fix it. The idea shouldn’t be only to raise revenue but to convert them into working propositions. The government should, however, think of selling unproductive assets like land and building to raise resources that don’t affect employment. That money should be used to retire public debt in order to reduce the interest burden”, he said.


Source - Economic Times