Finance Minister Pranab Mukherjee may have stuck to constitutional propriety in the UPA?s final Budget presented on Monday, but a passing mention of a fund set up by the government to finance social sector programmes and revive sick PSUs has created an unexpected furore.
?Though there wasn?t a word about any strategic stake sales or even IPOs by PSUs in the Budget speech, the finance minister?s office has been getting calls all morning asking whether the government could be actively considering divestments in its last few months in office,? a senior government official told FE on Tuesday.
In the 255 words that Mukherjee spoke on initiatives for public sector enterprises under the UPA regime, he dwelled only briefly on the National Investment Fund set up in November 2007 to park the proceeds from the divestment of government equity in PSUs.
With the fiscal deficit budgeted at 5.5% of GDP for 2009-10, the Centre will be hard pressed to pump fresh capital into meeting cash-starved PSUs? expansion needs. And given the time-consuming process for an IPO, the finance ministry is only striving to enable those PSUs that have their line ministry?s backing to raise capital from the markets, should the next government be agreeable.
?Many PSUs desperately need to expand to stay competitive. If in today?s situation, these firms are starved of capital from ministry budgets and not allowed to raise funds from the market either, it?s a double whammy. The new government can decide whether it wants to divest stake by piggybacking an IPO,? a senior finance ministry official said.
Finance ministry officials had stressed at the post-Budget press conference on Monday that there would be no divestments in 2008-09, nor are any planned for 2009-10. ?All we said on Monday was that the decision to disinvest would be based on the complexion of the new government. Nothing will happen before June 2009,? an official explained.
Though a dozen PSUs had started planning IPOs at the beginning of 2008-09, by the time they got clearances from their respective administrative ministries, the stock market had begun to tumble, forcing them to abandon their plans.
