The money could be garnered if the government lists all the profitable CPSEs and reduces stake in already-listed firms to 51%. The panel said Rs 24,000 crore could be garnered by diluting stake in unlisted CPSEs from 96.79% to 90%, while reducing the shareholding in already-listed firms from 84.73% to 51% will bring in Rs 3,41,000 crore. The balance money could be collected by paring stake in banks from 60% to 51%.
If the government pursues the disinvestment policy for the next five years, it could earn funds to the tune of nearly 0.88% of gross domestic product every year on an average, the commission said. The projection is based on the market value mid-October 2009.
The former finance secretary Vijay Kelkar-chaired body said that disinvestment remains a potent source of non-debt capital receipts and needs to be pursued actively, given the desirability of disinvestment in central PSUs to allow more space to private enterprises for the delivery of goods and services.
The commission suggested constitution of new bodies to develop and implement a suitable strategy on disinvestment and privatisation. One such panel is for deriving a rate of return that would act as the floor rate to decide which companies should be listed. As per the recommendation, if a company earns a rate of return lower than the fixed rate, it will be listed on stock exchanges. However, a stock analyst said such a move may not bear fruit as investors would avoid investing in such a company. It also called for expanding the use of disinvestment proceeds for capital formation also rather than just using it for social sector programmes. We recommend that the proceeds should also be utilised for augmenting critical infrastructure and the natural or environmental capital of the economy, the panel said in its report. This will also crowd in private investments in the economy, it said.
Ideally, whatever is generated from disinvestment should go for capital formation. However, in our polity it is not always possible. The suggestion is feasible in the long term, KPMG executive director Vikas Vasal said.
The government had last year announced that the disinvestment proceeds accruing to the National Investment Fund between April 2009 and March 2012 will be used for capital expenditure for social sector programmes. The Finance Commission also asked the states to expedite the process of finalising the accounts of their PSEs and in case a firm is not in operation, the state government should adhere to disinvestment and privatisation. There are more than 1,000 public sector enterprises in states, and the accounts of many of them have not been finalised since last 20 years.