Chapter on Finance

 POLICY FRAMEWORK OF DISINVESTMENT

  • The policy ensures that Government equity does not fall below 51% and Government retains management control.
  • Already listed profitable CPSEs not meeting the mandatory public shareholding requirements of 25% are to be made compliant by public offering out of Government shareholding or issues of fresh equity by the CPSES concerned or a combination of both.
  • All unlisted CPSUS having positive net worth, no accumulated losses and having earned net profit for three preceding consecutive years, are to be listed through public offerings out of Government shareholding or issue of fresh equity by the company or a combination of both.
  • Further public offerings by listed CPSES taking into consideration their capital investment requirements with the Government of India simultaneously or independently offering a portion of its shareholding in such CPSES.
  • All cases of disinvestment are to be decided on a case by case basis as each CPSE has different equity structure, financial strength, fund requirement, sector of operation, etc. These factors do not permit a uniform pattern.

 NATIONAL INVESTMENT FUND

  • On 27th January, 2005 the Government decided to constitute a “National Investment Fund” (NIF) into which the realization from sale of minority shareholding of the Government in profitable CPSEs would be channelized.
  • The Fund would be maintained outside the Consolidated Fund of India.
  • The income from the Fund would be used for investment in social sector projects which promote education, health and employment.
  • Fund would also be used for capital investment in selected profitable and revivable Public Sector Enterprises that yield adequate returns in order to enlarge their capital base to finance expansion/diversification.
  • Government, in November, 2009, decided to give one time exemption for utilization of proceeds from disinvestrnent of CPSES for a period of three years from April, 2009 to March, 2013.
  • Disinvestment proceeds during this period would be available in full for investment in specific social sector schemes decided by Planning Commission/ Department of Expenditure.
  • The Government in 2013 approved restructuring of the NIF and decided that the disinvestment proceeds with effect from the fiscal year 2013-14 will be credited to the existing ‘Public Account’ under the head NIF and they would remain there until withdrawn/invested for the approved purpose.
  • The approved purposes include recapitalization of public sector banks and Insurance Companies, subscribing to shares issued by CPSEs, investment in Indian Railways towards capital expenditure, etc.