Govt should divest stake in cash-rich PSUs to revive economy

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The new government should divest stake in the top 10 cash-rich PSUs to raise Rs 1 lakh crore and utilise the money to provide the much-needed push to economic growth and tide over revenue shortfall, an industry chamber said today.

The new government to be formed at the Centre after the results next week of the ongoing general elections should capitalise on the buoyancy in the stock market and robust FII inflows, Assocham said.

"The new government should take advantage of robust state of the stock market helped by heavy inflow of funds from the foreign institutional investors (FIIs) and help its exchequer which faces constraint of lower tax earnings because of slowdown in economy," Assocham President Rana Kapoor said.

The top 10 PSUs in which the government can divest 10 per cent or more stake are: ONGC, Coal India, State Bank of India, NTPC, Indian Oil Corporation, NMDC, Power Grid Corporation, Bharat Heavy Electricals Ltd, GAIL (India) Ltd and Bank of Baroda.

"The new government can easily raise Rs 1 lakh crore by divesting 10 per cent or more stake in top 10 PSUs to overcome the immediate problems of budgetary revenue in the face of economic slowdown," Assocham said.

"The combined market capitalisation of the top 10 PSUs exceeds Rs 11 lakh crore as the market is riding the wave of FII inflows built on decisive new government," it added.

If a stable government is formed at the Centre, the combined the m-cap of these PSUs is likely to go up by another 15-20 per cent, raising prospects for better realisations for the government from minority divestment, it said.

The number one PSU firm in terms of market capitalisation is ONGC with valuation of about Rs 2,87,000 crore followed by Coal India – Rs 1,86,000 crore and SBI – Rs 1,55,000 crore, it said.

The other companies in the government sector which can fetch the central exchequer a tidy sum include power major NTPC – Rs 95,000 crore and fuel refiner and marketing major Indian Oil Corporation – Rs 66,500 crore.

The government could not realise its divestment target in 2013-14 mainly on account of subdued economic conditions, forcing it to slash Plan expenditure.

In the interim Budget 2014 presented in February, the revised disinvestment target for 2013-14 was estimated at Rs 16,027 crore, lower than the original estimate of Rs 40,000 crore.

The government cut Rs 79,790 crore from the budgeted Plan expenditure of Rs 5,55,532 crore for financial year 2013-14 against the backdrop of a burgeoning fiscal deficit.

For the current fiscal, 2014-15, the government has kept the the Budget Estimates of Plan expenditure unchanged at Rs 5,55,322 crore.

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