The government?s move to raise funds on the strength of its R32,000-crore worth of shares in various companies, such as L&T, ITC and Axis Bank ? held through the Specified Undertaking of the Unit Trust of India (SUUTI) ? has run into a series of hurdles.

The idea was to raise clean loan that would be used for purchasing government?s stake in public sector companies earmarked for disinvestment this financial year. The finance ministry?s proposal has now encountered problems related to high-interest liability on such loans to be raised by the proposed asset manager and the margin requirement prescribed by the RBI. That has cast a shadow over the ministry’s last-ditch efforts to find resources to meet the gap between receipts and spending before the Union Budget is announced in the second week of March.

According to an official privy to the development, the monthly interest liability against the amount of R25,000 crore to be raised against SUUTI’s assets works out to R3,000 crore, which is more than SUUTI’s income of R2,000 crore. Of this, the government gets R800 crore by way of dividend income and interest from fixed deposits.

This would mean that PSU shares will have to be sold merely to pay interest liability. The official said, ?Keeping interest liability and income flow in mind, the government can raise close to R8,000 crore only, which defeats the purpose of the entire exercise?.

The ministry has asked for special waiver from the RBI to keep the interest rate at 10.75%, lower than the current commercial rate of 12-14%, a banker privy to the discussion said.

According to the government proposal, the government will first transfer its stakes in L&T, ITC and Axis Bank ? held through SUUTI, an offshoot of the erstwhile UTI ? to a newly-created asset management company (AMC), which will then borrow from banks to buy parts of government stakes in some PSUs. SUUTI holds 11.54% in ITC, 23.6% in Axis Bank and 8.3% in L&T valued at R32,000 crore.

Moreover, the legal issues regarding the winding up of SUUTI will also give a tough time to the ministry. As per the UTI Repeal Act, the SUUTI administrator can wind up the company only after discharging all claims and obligations for which it was formed.