Cabinet Secretary, Ajit Seth
As the Finance Ministry brace up to welcome a new Minister, officials are working overtime to prepare a presentation about their past achievements and future plans. The five departments in the Finance Ministry -- Economic Affairs, Revenue, Expenditure, Disinvestment and Banking -- are all busy preparing roadmaps for future action under new Minister. These views form part of the suggestions made by the departments to Cabinet Secretary Ajit Seth, who is collecting inputs from various ministries for the new government which will assume office on May 26. While the department of Economic Affairs has highlighted controlling current account deficits, it said inflation remains as a main challenge going ahead. The expenditure department in its presentation has mentioned reduction in fiscal deficit and adhering to fiscal consolidation roadmap as positives. However, it outlined the need for restructuring of subsidies to create fiscal space as a challenge. The revenue department has pinned the need for clarity in tax administration and suggested way forward taxation of cross border merger and acquisition. The banking department has highlighted NPAs and financing of stalled projects and branch expansion and ATM installation targets as key thrust areas. Also capital infusion in public sector banks is a major area as government finances are constrained. The Department of Disinvestment (DoD) has given a rather broader options of either a strategic sale of state-owned enterprises in the noncore sectors like steel and cement, or a minority stake sale as is currently happening. The move to divest entire stake in the non-strategic PSUs, according to DoD officials, would also help in meeting the ambitious disinvestment target of Rs 51,925 crore this fiscal. Alternatively, the official suggested, the government could follow the existing practice of piecemeal stake sale in state-owned companies. The strategic sale, however, could be a better option as it would help the government in realising the true value of the investments made in setting up of the PSU. The official said nonstrategic PSUs from which the government could easily exit relate to sectors like cement, steel, textiles, fertiliser, petrochemical and transport equipments. The government, the official added, could keep its control over sectors like defence, petroleum, power and heavy engineering. The finance ministry will continue to keep the divestment target for 2014-15 as it is unless the BJP-led government changes the disinvestment strategy of India. “In case of policy change, we may go for additions in disinvestment target,” another official said. As per the interim budget presented in February, the UPA government proposed to mobilise Rs 15,000 crore from the stake sale in HZL and Balco. Further, it hopes to garner Rs 36,925 crore from disinvestment in different PSUs in 2014-15. The government expects to sell its remaining stake in Hindustan Zinc (HZL) and Balco in 2014-15. It sold majority stakes in the two companies to the Vedanta Group during 20012003 and now holds 29.54 per cent in HZL and 49 per cent in Bharat Aluminium Company (Balco). The government also holds some stake in Larsen & Toubro, Axis Bank and ITC through SUUTI.
WHY DISINVESTMENT :
* Improvement in corporate
governance * Higher disclosure levels due to listing to bring about greater transparency and accountability in the functioning of the Central Public Sector Enterprises * Adding market discipline to the
functioning of CPSEs * Promote people’s ownership in
CPSEs * Unlock true value of CPSEs for
investors, employees, company and Government. Besides, the finance ministry is
understood to have short-listed as many as 50 unlisted central public sector enterprises, including RINL, RITES Ltd and Western Coalfields, which can be potential candidates for disinvestment in the current financial year. Coal India Ltd is one of the listed companies that are being targeted by the DoD for stake sale this fiscal. Coal India divestment was one of the big ticket items last year but protests from trade unions and controversies in coal block allocation restricted the then Prime Minister Manmohan Singh to take the tough decision. Last fiscal, the government has managed to meet the scaled down disinvestment target of Rs 16,027 crore, which was revised lower in the interim budget for 2014, from Rs 40,000 crore projected to be collected earlier. In a last minute rush for meeting the revised target, in March the government sold 10 per cent stake in Indian Oil Corporation (IOC) to ONGC and Oil India Ltd (OIL) for Rs 5,340 crore. It also sold 5 per cent stake in BHEL to Life Insurance Corporation (LIC) for Rs 2,685 crore. Besides, the Exchange Traded Fund (ETF) garners around Rs 3,000 crore through a new fund offer. ETF is a security that tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange.