Giving a virtual go-by to privatisation, the government on Thursday declared selective divestment in profit-making PSEs to raise just Rs 4,000 crore (Rs 40 billion) during the current fiscal, down from Rs 14,500 crore (Rs 145 billion) realised during 2003-04 by the previous National Democratic Alliance government.

"Divestment and privatisation are useful economic tools. We will selectively employ these tools, consistent with the declared policy," Finance Minister P Chaidambaram said in his Budget speech.

The Divestment Developmet: Complete Coverage

He announced the setting up of a Board for Reconstruction of Public Sector Enterprises, which would advice the government on the matter of sick PSEs as well as its divestment programme. "The board will advice the government on the measures to be taken to restructure PSEs, including cases where divestment or closure or sale is justified," Chidambaram said.

The finance minister said the government was looking at meeting divestment targets through the sale of its equity in NTPC, which has already filed a prospectus with the Securities and Exchange Board of India.

"In order to extract value for its holding and to compensate the effect of dilution, the government intends to piggy-back on the public issue of NTPC and divest approximately five per cent of its holding.

"This and other cases which are under examination are expected to yield a sum of Rs 4,000 crore in the current year," Chidambaram said.

The finance minister said that despite selective privatisation, the government was firm to retain control over the PSEs. "As long as the government retains control over the PSE, and its public sector character is not affected, the government may dilute its equity and raise resources to meet the social needs of the people," Chidambaram said.

He asked the BRPSE to examine each case objectively and make recommendations on divestment, "consistent with the Common Minimum Programme."

Also, to highlight the government's resolve on restructuring, he announced a package for Hindustan Antibiotics Ltd and Indian Telephone Industries.

"Hindustan Antibiotics will be given financial support for restructuring. A rescue package has been worked out for ITI, and it would be given Rs 508 crore (Rs 5.08 billion) to remain out of the net of the BIFR," the finance minister said.

The government also estimates to garner Rs 12,978 crore (Rs 129.78 billion) in dividends from PSEs and on other investments this fiscal against Rs 10,841 crore (Rs 108.41 billion) in 2003-04.

Chidambaram also announced a Rs 14,194 crore (Rs 141.94 billion) equity support and Rs 2,132 crore (Rs 21.32 billion) as loans for Central Public Sector Enterprises, including the Railways, for the current fiscal.

"Major investments will be made in PSEs under the power, telecommunications, railways, roads, petroleum, coal and civil aviation sectors," he said.