No random sale of family silver, insists Nirmala

'Banks-driven' solution, not a govt-driven one, to deal with bad assets

Amid strong opposition from the RSS affiliate Swadeshi Jagran Manch and opposition parties, Union Finance Minister Nirmala Sitharaman on Sunday justified the proposed disinvestment in public sector undertakings, saying it was a responsible, transparent and open process. Sitharaman, who presented the Union Budget on February 1, said, “Disinvestment is a very responsible, transparent and open process; not a random list. It involves a huge process of consultation before a call is taken about disinvesting. Even then, the way it has to be disinvested is layered and at every stage, it is vetted.”

The Finance Minister, after her interaction with Mumbai’s corporate and business leaders, industrialists and industry associations, further said that the government’s latest disinvestment policy, including the proposal to privatise two state-run banks is not like “selling the family silver”, as alleged by the opposition. She added that the government would work with the Reserve Bank of India to execute the bank privatisation plan.

“Family silver should be strengthened; it should be our taaqat (strength). Because you’ve spread it so thinly, there are many of them (public sector undertakings) that are not able to survive; and the few that can perform, do not get due attention,” noted Sitharaman.

She argued that for the first time, the government had devised a clear strategy on divestment so that taxpayers’ money would be spent wisely. She said that the government wanted a few public sector enterprises in specified sectors to do well.

Sitharaman, who had announced the concept of a bad bank in the country in her Budget speech, said that the government had come out with a ‘banks-driven’ solution, and not a government-driven solution, to deal with bad assets or disposal of bad assets. She clarified that the government had no plan to form any bank investment company to house government stakes in banks.

“Banks themselves are agreeing to form something like a holding company, cull out bank assets and put them in these companies which will do the job,” she said. According to Sitharaman, the Reserve Bank of India was working with banks on the issue.

On the issue of GST compensation, she said the government was releasing it to the respective states promptly every Monday. “I personally took note of the data on which state had to be given compensation and the amount of GST compensation,” she said.

On the imposition of Agriculture Infrastructure and Development Cess (AIDC), Sitharaman said that it had been done as customs duty was reduced to some extent. “With this cess, the government will have some money for funding agricultural infrastructure activities. Since such infrastructures are built at the state level, the money collected will go back to states,” she added. Furthermore, Sitharaman said the finance ministry was working on the contentious Financial Resolution and Deposit Insurance (FRDI) Bill but was not sure when it would be tabled in the House. The FRDI Bill seeks to offer a bail-in clause to banks, which many fear will be detrimental to depositors.