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 Govt can erase fiscal deficit by offloading stake in PSUs: SMC

Press Trust of India / New Delhi June 8, 2009, 17:00 IST

The government may mobilise a whopping Rs 4 lakh crore, an amount which may help in wiping out thecountry's fiscal deficit, by bringing down its holding to 51 per cent in all the listed public sector firms, areport says.

"If the government plans to sell its stake in the listed PSUs maintaining its stake up to 51 per cent, the

total amount that can be raised is about $94.77 billion (over Rs 4.46 lakh crore)," SMC Capitals said in a

report.

With fiscal deficit rising to $62.26 billion (Rs 2.96 lakh crore) - over six per cent of GDP - last fiscal, taming

the ballooning deficit would be on its priority agenda when the new UPA government presents the Union

Budget in the first week of July.

"If the government goes ahead with disinvestment plans, the infrastructure sector will be the main

beneficiary as the proceeds would be ploughed back into the company," SMC capitals equity head

Jagannadham Thunuguntla said.

"It is unlikely that the government would go for divestment in the PSU lenders. Shipping, logistics firms

would turn out to be the front runners as the government can mobile more funds by selling less stake," he

added.

Addressing the first 15th Lok Sabha session last week, President Pratibha Patil had said, "My

government will develop a roadmap for listing and people-ownership of PSUs while ensuring that the

government equity does not fall below 51 per cent."

There have been voices from various quarters that the proceeds from disinvestment can be used to plugthe rising fiscal deficit which was significantly higher from the original estimates of 2.5 per cent. For thisfiscal, the interim budget projected a deficit of 5.5 per cent of GDP.

Besides listed PSUs, as per the disinvestment policy, the government is also planning initial public offers(IPOs) of several unlisted PSUs as well such as NHPC, OIL, Coal India Ltd, BSNL, RITES, IRCONInternational.

This signifies that the present government, with the clear and aggressive disinvestment policy, has lot ofcushion and headroom in its fiscal policy making, the report said.

"With the aggressive disinvestment policy, the fiscal deficit may not be such a serious threat to the Indianeconomy, as generally perceived," Thunuguntla said.

The disinvestment process, which came to a virtual halt during the last 3–4 years due to opposition of Leftparties, may pick up speed considering the fact that this time the new UPA government has been formedwithout the Left support.

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From 1994–95 till 2007-08, the government had successfully mobilised Rs 46,600 crore throughdisinvestment and during the NDA government's rule, from 1998–99 to 2003–04, the government raisedRs 33,700 crore via this route.