Finance minister Pranab Mukherjee may have chanted the reform mantra in Budget 2009-10 without mentioning any specifics, but on Tuesday, the finance ministry made its priorities clear for the first time, by tabling in Parliament its menu of financial sector reforms to be taken up immediately.
These include liberalisation of rules governing sale of shares by Indian companies abroad through American depository receipts (ADRs), relaxation in the external commercial borrowings (ECBs) guidelines and coming up with innovative measures to spur investments through public-private partnerships.
Maintaining the public shareholding in listed firms at a minimum level of 25% is also a priority, which has already been discussed with the market regulator Securities and Exchange Board of India (Sebi). The requirement of higher public shareholding will be implemented in phases, though the government is yet to finalise the exact percentage of the minimum float, an official said. ?It could be more (than 25%). It is being debated,? he said.
The government also intends to set up a dedicated SME stock exchange or a platform for small & medium enterprises to raise equity, minister of state for finance Namo Narain Meena said in a written reply in the Rajya Sabha on Tuesday. In fact, at Sebi?s board meeting in early July, the finance minister had expressed his keenness to start an SME exchange. While there is a ?considered view? on raising the minimum public float in the listed companies, the measures governing ADRs and ECB rules are to be fleshed out, a senior official told FE.
Changes in the ECB policy could involve allowing more companies and sectors to bring funds through the automatic route. The rules can be further liberalised to allow more sectors access the ECB window. The government has recently allowed developers of special economic zones raise ECBs for providing infrastructure facilities in SEZs.
Incidentally, Reserve Bank of India governor D Subbarao said in Mumbai on Tuesday the financial sector reforms need not be slowed down, but recalibrated in the backdrop of the global crisis.
Another measure on the priority list of the government include evolving the ?takeout financing scheme? for long-gestation infrastructure projects, and giving trusts greater autonomy in deciding their investments by amending the Indian Trusts Act, 1882. India Infrastructure Finance Company Ltd has appointed a consultant to finalise the takeout financing scheme, Meena said.
Besides, passage of the Pension Fund Regulatory & Development Bill is on the cards. This will give statutory backing to the interim pension regulator and allow foreign investors pick up to 26% stake in the sector. The finance ministry has finalised the draft bill after clearance of the law ministry. It will be tabled in Parliament after approval from the Union Cabinet anytime.
While spearheading these reforms, the government would continue to focus on fiscal consolidation by cutting down unproductive spending in order to sustain high growth. To spur investment in the infrastructure sector, the government is considering putting in place a new monitoring mechanism consisting of officials from various administrative ministries, which will meet regularly to take stock.
