At a time when the UPA government is hard pressed for funds and has conceded it will miss this year?s fiscal deficit targets under the Fiscal Responsibility and Budgetary Management Act, a mechanism it created in November 2005 to invest earnings from public sector units? (PSU) disinvestment proceeds, into social development projects and sick PSUs? revival, has just delivered its first dividend to the Centre.
The department of disinvestment has just received nearly Rs 100 crore as the earnings on the National Investment Fund (NIF) corpus?translating into a return of little over 10% on its initial pool of Rs 994.82 crore. Meanwhile, the NIF kitty has swelled to Rs 1,814.45 crore, minister of state for finance SS Palanimanickam informed the Lok Sabha last week.
According to the mandate of the NIF, 75% of its annual income is to be deployed on selected social sector schemes that promote education, health and employment. The residual 25% of the annual income is to be used to meet the capital investment requirements of profitable and revivable sick central PSUs.
A finance ministry official explained the investment philosophy adopted for the NIF: ?The objective is not to deplete the basic corpus.? Accordingly, the fund managers have been asked to invest only 10% of the funds in equity and the balance 90% in debt instruments.
It is understood that North Block and the Planning Commission are discussing the possibility of diverting the returns for investments into the ailing power sector. A final decision is however yet to be taken on the issue.
?We will be handing over the funds to the department of expenditure, which can decide where to use it,? an official from the department of disinvestment said.
Though set up after Cabinet clearance in 2005, the NIF remained non-functional for almost two years and was finally operationalised in October 2007 when the finance ministry appointed three fund managers for it. UTI Asset Management; SBI Funds Management; and LIC Mutual Fund Asset Management won the mandate to invest the NIF corpus, which was kicked off with the Rs 994.82 crore received from the sale of government equity in Power Grid Corporation of India Ltd.
Of the total funds, UTI Asset Management Company was initially given Rs 368.91 crore, SBI Funds Management Rs 368.91 crore and LIC Mutual Fund Asset Management Rs 257 crore.