PM flags off divestment

Prime Minister Manmohan Singh put an end to the dillydallying on divestment in public sector companies by approving a plan to partsell shares in them that may help the cashstrapped government raise at least Rs 60,000 crore and reduce its dependence on market borrowings to fund the building of roads, hospitals and schools. Investors cheered the decision, interpreting it as a sign the government was returning to the path of bold economic reforms that could help contain the strain on its finances, after it cut taxes and raised spending in the last year to contain the damage arising out of the global credit crisis. The Cabinet Committee on Economic Affairs decided that the government will lower its stake in all listed public sector enterprises (PSEs) to at least 90%. There are 12 PSEs such as MMTC in which its stake is more than 90%. All unlisted state firms making profits in the past three consecutive years will also be listed, home minister P Chidambaram said after the Cabinet meeting. Pointing to the tight fiscal situation and need to fund social security programmes, he said a special dispensation is being made for three years (2009 to 2012) to channelise the disinvestment proceeds into social security programmes. He clarified that funds raised so far this fiscal year from stake sales would not come under the new rule. Mr Singh, who spearheaded economic reforms in 1991 after the country came close to defaulting on overseas loans, has signalled with this decision that he is free off the shackles of the communists who did not allow him to sell shares in public sector companies in the previous term. His government believes that divestment is not selling family jewels, but is essential to save the nation’s finances. The government is staring at a fiscal deficit of 6.8% this year, a 16-year high. If the estimated sale happens, the present government could break the divestment record set by the Vajpayee-led NDA government, which raised $6 billion (Rs 28, 200 crore at today's exchange rates) between 1999 and 2004.