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Home arrow News arrow Business News arrow Divesting upto 51% in Listed PSUs can reduce fiscal deficit by over 90% - Study
Divesting upto 51% in Listed PSUs can reduce fiscal deficit by over 90% - Study Print E-mail
Written by Anand   
Wednesday, 16 September 2009
New Delhi: A study brought out by ASSOCHAM on 'Disinvestment : Focused on Listed PSUs' reveals that the Government can reduce it's fiscal deficit by over 90%  through divestment of upto 51% equity in 45 PSUs & banks to generate over Rs. 4 lakh crores.

The study has identified 4 companies in the engineering sector, 4 companies in the power sector, 4 in the metal sector, 7 companies from the oil sector, 20 PSU banks and 6 engaged in  miscellaneous business for offloading government equity.

Releasing findings of the Study, Mr. Sajjan Jindal - President ASSOCHAM, said that the proposed amount would help government not only to contain its fiscal deficit but the suggested move could further push up stock markets as also open up channels for infusing funds to support it’s infrastructure expansion drive which requires thousands of crores of rupees.

There are 4 engineering companies in the PSUs recommended for disinvestment by ASSOCHAM which include Bharat Earth Movers, BHEL, EIL and BEL. Currently, 54.03% controlling stake lies with government in Bharat Earth Movers against 67.72% of BHEL, 90.4% in EIL and 78.86% in BEL. Proposed disinvestment in the engineering sector can fetch government a revenue of Rs.23659 crore, says ASSOCHAM President, Mr. Sajjan Jindal.

Among power sector PSUs, whose disinvestment has been recommended by ASSOCHAM include NTPC, PFC, POWERGRID and Rural Electrification Corporation (REC). In NTPC, government stake is currently 89.5%, PFC, it is 89.78%, POWERGRID 86.36% and REC 81.82%.  In these four companies, if considerable government stake is divested to bring down its equity to 51%, it would earn a revenue of Rs.99044 crore.  Moreover, the government will not loose its controlling stake in such a manner of disinvestment.No. of shares proposed to be diluted in the power sector consist of 5372518581.

In the metals sector, 4 companies are recommended for disinvestment, which include Hindustan Copper, National Aluminum Co. Ltd., Navyeli Lignite Corpn., Ltd. and National Mineral Development Corporation.  These companies have government stakes of 99.59%, 87.15%, 93.56% and 98.38%. Total amount by bringing down government stake in these upto 49% could be around Rs.97735 crores respectively.

The share prices of the above companies on an average has been taken with an assumption that the Sensex is hovering around 16000 basis points and if the disinvestment proceeds right away, the government can earn much more than what has been projected by the ASSOCHAM since it expects Sensex to rise over 19,000 points after a couple of months from now as recovery will start happening and Indian economy gradually return to rails of boom time period.

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