The government has given more financial autonomy to central public sector enterprises for acquisition of raw material assets abroad. Under a new policy approved by the Cabinet on Thursday, Navratna and Maharatna CPSEs in agriculture, mining, manufacturing and electricity sectors have now been given powers to invest up to R3,000 crore and R5,000 crore, respectively, in overseas buys without taking prior approval from the government.
Navratna companies are currently allowed to investment R1,000 crore in a single project (domestic or overseas) without gobvernment approval. This limit is higher for Maharatna companies at R5,000 crore.
The move is aimed at facilitating these companies to compete with global corporate giants, who have often outbid CPSEs on raw material asset buys. The changes are a precursor to government setting up a soverign wealth fund by dipping into its forex reserves for buying overseas natural assets.
According to the Cabinet decision, the enhanced financial autonomy for overseas buys will be given to companies that record continuous profit for three years. ” The policy will facilitate the acquisition of coal, iron ore and other assets abroad,? said S Sundareshan, heavy industries and public enterprises secretary.
The government proposes to constitute a Coordinating Committee of Secretaries (CCoS) headed by the Cabinet secretary to facilitate quick and coordinated decision-making, coordinate grant of concessional credit to foreign enterprise/government, recommend government funding and decide about the nature of the government funding on a case-to-case basis. Iinformation and broadcasting minister Ambika Soni told reporters that in due course government would consider constituting a dedicated, sovereign wealth fund.
In another decision, the Cabinet approved the proposal to give India Infrastructure Finance Company (IIFCL) the non-banking finance company status. With this, the company would come under the regulatory oversight of RBI.
For this, the government will increase the authorised capital of IIFCL from R2,000 crore to R5,000 crore with a provision that it can be further increased to R8,000 crore, with the approval of the finance minister. The green signal will enable IIFCL to lend to the infrastructure sector that is estimated to require $1 trillion investment during the 12th Five-Year Plan (2012-2017).