The Cabinet Committee on Economic Affairs (CCEA) will take up a proposal revising the end use of NIF funds on Thursday.
Currently, NIF is used for funding six social sector schemes. According to official sources, the idea behind the action is to utilise money coming from disinvestment for creating capital assets also.
Apart from bank recapitalisation, the NIF could also be used for creating a sovereign fund for acquiring energy and other mining assets abroad by the CPSEs, sources told FE.
Now the government has sought Cabinet approval for remodeling the utilisation of funds of NIF.
The NIF came into existence in 2005 with an idea that 75% of the income from the fund was to be spent to finance select social sector schemes while 25% was to meet the capital investment requirements of profitable and revivable Public Sector Enterprises.
Sources said post Cabinet approval, the funds in NIF will be used for subscribing the shares of central public sector enterprises (CPSEs), including PSBs and public sector insurance firms on rights basis to ensure 51% government ownership is not diluted.
The government is also expected to set up an empowered group of ministers under the finance minister.
The EGoM will then decide on the proposals put forward by the department of disinvestment (DoD) regarding the usage of fund money. The NIF corpus as on August 31, 2012 was R1,814. 45 crore. And the fund is managed by three public sector mutual funds SBI, LIC and UTI mutual funds.
The change in utilisation pattern of NIF money had come in 2009, when in view of the difficult economic situation caused by the global slowdown and severe drought, decided to grant one-time exemption for utilization of all proceeds from disinvestment of CPSEs deposited in the NIF.