NIF to buy PSU stocks, fund bank recapitalisation

Jan 18 2013, 02:25 IST
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SummaryThe decision to ‘align’ the NIF operation for ‘enhancing’ the disinvestment policy was taken at a meeting of the Cabinet Committee on Economic Affairs (CCEA) on Thursday.

The government has decided to remodel the National Investment Fund from April 1 and use disinvestment proceeds to buy back shares of public sector enterprises as well as recapitalisation of banks and insurance firms.

The decision to ‘align’ the NIF operation for ‘enhancing’ the disinvestment policy was taken at a meeting of the Cabinet Committee on Economic Affairs (CCEA) on Thursday.

This would be the second overhaul of the NIF since November 2009, when the government decided to use proceeds from disinvestment only for social sector spending. The exemption is applicable till March this year. “The disinvestment proceeds with effect from the fiscal year 2013-14 will be credited to the existing ‘public account’ under the head NIF, and they would remain there until withdrawn or invested for the approved purposes,” an official release said.

Disinvestment proceeds will be used to subscribe to shares issued by PSUs including public sector banks and insurance firms on rights basis to ensure that the government retains 51 per cent ownership.

Funds from the revamped NIF will also be used for preferential allotment of shares of the CPSE to promoters so that government holding does not go down below 51 per cent, in all cases where the CPSE is going to raise fresh equity to meet its capex programme.

Originally set up in 2005, the NIF has a corpus of Rs 1,814.45 crore from the disinvestment proceeds of Power Grid Corporation and Rural Electrification Corporation done during 2007-08, and is currently managed by three fund managers.

CDMA spectrum base price cut by half

Decks have been cleared for Sistema Shyam to participate in the forthcoming CDMA spectrum (800 MHz) auction with the Cabinet on Thursday approving a 50 per cent reduction in the reserve price.

With this, Sistema Shyam — where Russian conglomerate Sistema Group holds majority stake — would have to pay as low as Rs 2,900 crore for 2.5 Mhz of spectrum in 21 circles after its entry fee of Rs 1,600 crore, which it paid in 2008, is adjusted. If the company chooses to bid for 5 Mhz spectrum, it can still keep its payout low, almost in the same region, by going for only limited circles.

The empowered group of ministers on spectrum pricing on January 7 recommended that the government either reduce the reserve price by 30 per cent or 50 per cent. The November auctions had not seen participation in the CDMA space.

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