L&T, Axis New Trophies for Finmin After Mkt Boom
Ministry to showcase bloated assets as tools for driving Modi govt’s revival programme
DEEPSHIKHA SIKARWAR & VINAY PANDEY
The surge in stock prices of Larsen & Toubro, Axis Bank and other companies has delivered a bonanza for the new government. The finance ministry will present these assets as among the instruments that can be used to help the Narendra Modi administration’s economic revival programme. The value of the stakes that the government has in listed nonstate companies through SUUTI (Specified Undertaking of the Unit Trust of India) has risen to nearly .` 52,000 crore at the last count, over half of it accounted for by just one company. Together with other assets, the corpus adds up to nearly .` 60,000 crore. This money could finance most of the railways’ diamond quadrilateral project or the government could use it to buy out much of the stressed assets of banks to infuse capital and also give them a fresh start to aid economic rejuvenation. Engineering and construction company L&T has risen over 45% this calendar year, valuing the government’s 8.19% stake in it at about .` 12,000 crore. The biggest bounty, however, is the government’s 11.28% stake in ITC, which is engaged in tobacco, hotels and consumer goods. The holding is worth more than .` 31,000 crore. Axis Bank has risen nearly 45% since January. After divesting some of its holding in the last financial year, the government holds an 11.7% stake in the bank that’s worth more than .` 10,000 crore. Along with the residual holding in Hindustan Zinc and Balco, the government has nearly .` 1 lakh crore that it can use for targeted spending.
“We will flag these funds to the new government for utilisation for a specific purpose,” said an official involved in their administration.
SUUTI was formed in Feb-
Value of stakes that govt has in listed non-state companies and other assets adds up to nearly 60,000 crore
ruary 2003 after the restructuring of the erstwhile Unit Trust of India. The Cabinet had, in March 2012, cleared a proposal to wind up SUUTI and create a National Asset Management Company (NAMC) to manage the assets owned by it. The NAMC was, in turn, to leverage its assets to buy government stakes in public sector companies.
But in January this year, the Cabinet deferred a decision on this, allowing the government to monetise its holdings.
The government subsequently raised .` 5,500 crore from the sale of part of its stake in Axis Bank, making up for a shortfall in tax and disinvestment receipts.
As per the interim budget, the fiscal deficit for the current financial year is projected at 4.1% of GDP. The current fiscal consolidation plan envisages lowering the deficit to 3% of GDP by 2016-17.
However, the new government may want to tweak the fiscal consolidation plan by changing the milestones in line with its developmental goals.
The SUUTI assets and the residual stakes in Hindustan Zinc and Balco would allow it to pursue aggressive fiscal consolidation as well as boost infrastructure spending to give a fillip to growth.