Rather than a one-time affair, divestment should be a continuous process through which the

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government should be able to generate at least Rs 25,000 crore every year, the economic survey tabled in Parliament on Thursday said.

To ensure fiscal sustainability, all public sector enterprises (PSEs) sho-uld be listed on the bourses by selling 5 to 10 per cent equity to the public. It has also suggested disposing of loss-making public sector units that cannot be revived.

“Complete the pro-cess of selling 5-10 per cent equity in previously identified profit-making non-navratnas... For those in which net worth is zero, allow negative bidding in the form of debt write-off,” it said.

The PSU index on the Bombay Stock Exchange closed 1.95 per cent above the previous levels as shares of 28 of 47 companies advanced. Power Finance Corporation, Oil and Natural Gas Corporation and Gas Authority of India Ltd rose about 7 per cent.

The Congress party in its election manifesto had said that it would pursue divestment of government companies and banks without bringing down its equity below 51 per cent. This makes out a case for further scaling down government stake in listed entities such as ONGC, NTPC, Bharat Heavy Eletricals, Power Finance Corporation, and Rural Electrification Corporation.

Initial public floats of NHPC Ltd, Rites Ltd and Oil India Ltd have already been lined up with the market regulator. Coal India, which has just been awarded navratna status, is expected to shortly file the draft prospectus for its maiden public offer. The survey suggested that the government should sell 49 per cent stake in two sick subsidiaries of CIL -- Eastern Coalfields and Bharat Coking Coal -- to private parties. It added that the strategic partners could be selected through the auction route.

As per official figures, out of 242 PSUs, 160 were profitable while 53 were loss-making. The survey says that net profit of these 160 PSUs stood at Rs 91,083 crore in 2007-08. The loss-making enterprises posted losses worth Rs. 11,274 crore.

The cumulative investment (paid-up capital plus long terms loans) in all the PSUs stood at Rs 4,55,409 crore as on March 31, 2008. In 2007-08, public sector units contributed Rs 1,65,994 crore to the exchequer. This marked an increase by 11.6 per cent from Rs 1,48,789 crore contributed a year ago. Government companies earned foreign exchange worth Rs 74,283 crore during 2007-08. However, the total foreign exchange outgo at Rs 3,68,196 crore exceeded their earnings from abroad.

Prithvi Haldea of Prime Database said, “Raising Rs 25,000 crore through divestment every year in the next five years would be a welcome move. Auctioning of loss-making PSUs is also a very good idea, provided the bidding is done in a transparent manner.”

Industry groups also hailed the recommendations. CII president Venu Srinivasan said, “We look forward to revival of disinvestment in PSUs. Not only will it provide funds to the government but also drive wider shareholding in key sectors where the public sector is dominant.”