SUUTI's shares not for all: FM

Written by fe Bureau | New Delhi | Updated: Mar 2 2013, 07:26am hrs
Finance minister P Chidambaram on Friday termed his plan to raise capital receipts of R55,814 crore through disinvestment in the next financial year realistic rather than aggressive but said that the government's SUUTI sharesin three private firms would not be sold through the competitive bidding route. The proposed sale of a chunk of SUUTI shares in Axis Bank, ITC and L&T now vested with an asset management company would be restricted to a class of buyers like Life Insurance Corporation, State Bank of India or other PSU banks, the minister told FE managing editor MK Venu in an interview for DD News.

Chidambaram said he hoped to get the two Bills on the goods and services tax including that on constitutional amendment passed in the monsoon session of Parliament and hinted that the Reserve Bank of India might take complementary action to promote growth by cutting rates in the upcoming policy review.

Stating that pure disinvestment of a clutch of PSUs identified as disinvestment candidates could rake in R40,000 crore, the minister said another R14,000 crore could be raised through the sale of residual government stakes in non-government companies (read Balco, Hindustan Zinc and SUUTI shares).

The Cabinet in March 2012 cleared the winding up of the Specified Undertaking of Unit Trust of India (SUUTI) and the transfer of its assets (11.5% stake in ITC, 23.6% in Axis Bank and 8.3% in L&T) to an asset management company with a view to leveraging these. Explaining why the sale of these shares which are worth around R43,000 crore at current market prices was not an obvious option for the government, Chidambaram said: Even now, we are not saying we are going to sell every one of them. There are some other considerations, including strategic considerations why we may not wish to sell all of them. We may not wish to sell them through competitive bidding either. We might want to sell them to restricted class of buyers like LIC or SBI or banks. These are decisions which will be taken in course of time.

One strategic concern is that selling 11.54% of ITC's shares can trigger a takeover move by the Indian company's parent British American Tobacco, which currently has a 31.6% stake in ITC. Domestic financial institutions hold 20.72% and this might allow BAT to be in the driver's seat if foreign institutional investors which hold 15.26% in ITC support it. Also, the government reckons that it should retain a significant stake in Larsen & Toubro, which is eyeing defence production in a big way when the indigenisation of this industry is a strategic priority for the government.

The minister suggested that with the government reining in the fiscal deficit, the RBI night now play a complementing role to push growth by reducing interest rates. I called the (RBI) governor on the eve of the Budget and shared the numbers. The governor relies heavily on the monetary policy advisory committee. I am sure they will take note of all that has happened in the Budget and take the right decision. I think the burden of growth falls more upon the government and less upon the central bank, but the central bank must also play its role... I think reducing policy interest rates will certainly help in stimulating growth.

On the legislative agenda for reform, Chidambaram said that with consensus evolving with states after the the Centre agreeing on central sales tax compensation (the Budget set aside Rs 9,000 crore for this), the minister said there was no reason why the two Bills (on GST) can't be finalised quickly, passed by Parliament and implemented.

I am aiming at the conclusion of negotiations on the GST, say, by the end of May or June, so that we can move forward, even in the monsoon session.

On whether the tax revenue growth target of 19%for 2013-14 was aggressive, the minister said: It is a very reasonable projection. When the CSO (Central Statistics Office) says the economy is growing at 5%, we have seen a 16.7% growth in tax revenues (revised estimates). Therefore, as the economy is expected to grow at an average of 6.4-6.5% next year, that will give an 18% revenue growth, and then there could be an additional resource mobilisation of Rs 18,000 crore, which will give an additional 1%. The normal growth rate in revenues together with additional mobilisation should result in a 19% growth in tax revenues.

Defending the expenditure projections in the Budget, Chidambaram said the Plan Expenditure estimate of Rs 5.5 lakh crore, an increase of only Rs 31,000 crore from this year's Budget estimate, was perfectly justified.

In the second year of the 12th Plan, we can't have a BE (for Plan spending) lower that the previous year's.... By and large, the non-Plan expenditure determines itself and Plan expenditure gives a little bit of room for adjustment. So the assumption that we will spend Rs 16 lakh crore is a completely fair and I don't think we could have controlled it any more.