The government on Monday announced increasing people's holding in public sector undertakings through the divestment programme, but said it would retain at least 51 per cent equity in these enterprises and would keep the banks and insurance companies under its control.
Finance Minister Pranab Mukherjee proposed estimated divestment proceeds of Rs 1,120 crore for 2009-10, which includes divestment in Rail India Technical and Economic Services (RITES), Cochin Shipyard Ltd, Telecommunications Consultants India Ltd, Manganese Core India Ltd, Rashtriya Ispat Nigam Ltd and Satluj Jal Vidyut Nigam Ltd.
Presenting the Union Budget in Parliament, Mukherjee said, "The Public Sector Undertakings are the wealth of the nation, and part of this wealth should rest in the hands of the people. While retaining at least 51 per cent government equity in our enterprises, I propose to encourage people's participation in out divestment programme."
He, however, added that the PSUs such as banks and insurance companies would remain in the public sector and "will be given all support, including capital infusion to grow and remain competitive."
Terming financial sector as the "life blood of any economy," Mukherjee said the government's approach to the arena has been "to ensure robust oversight and regulation, while expanding financial access and deepening markets."
Mukherjee further said this approach has helped Indian banking and financial sector remain "relatively unaffected: in the turbulence in the world financial markets.
"Never before has Indira Gandhi's bold decision to nationalise our bankiing system exactly 40 years ago-- on July 14, 1969-- appeared as wise and visionary as it has over the past few months," Mukherjee said, while asserting that the government needs to keep PSU banks and insurance companies under its control.
At the same time, the threshold for public or non-promoter shareholding in all the listed companies, including those from public and private sector, would be raised, Mukherjee said.
"The average public float in Indian listed companies is less than 15 per cent. Deep non-manipulative markets require larger and diversified public sahareholding. This requirement should be uniformly applied to the private sector as well as listed public sector companies.
"I propose to raise, in a phased manner, the threshold for non-promoter public shareholding for all listed companies," he noted.
The Budget further pegged the revised 2008-09 estimate for divestment proceeds at Rs 1,165 crore on account of divestment of government equity in CPSEs. This includes small portion of equity in REC and NHPC.
Besides, the provision has been made for transfer of this amount, as also the estimated divestment proceeds of 1,120 crore for the current fiscal, to the National Investment Fund (NIF).
The government has constituted NIF into which the proceeds from the divestment of government equity in select CPSEs would be channelised and would be professionally managed by investment in selected public sector mutual funds to provide sustainable returns without depleting the corpus.
These transactions would be made in such a manner that these are deficit neutral.
Other than the estimated divestment proceeds, the receipt of Rs 502.51 crore has also been assumed on account of bonus shares issued by GAIL and NMDC.