Divestment proceeds to fund PSUs: FM

Proceeds from the stake sale of state-run enterprises during the next financial year are likely to be used to infuse capital in public sector companies, banks and insurance firms, according to Namo Narain Meena, Minister of State for Finance.

According to him, the proceeds from disinvestment would be credited to the National Investment Fund (NIF), which was set up in 2005.

“The government has decided that the disinvestment proceeds with effect from the fiscal year 2013-14 ... will be used for subscribing to the shares being used by the central public sector enterprises (CPSEs), including public sector banks and public sector insurance companies,” he said in a written reply in the Rajya Sabha on Tuesday.

The proposed fund will be used for preferential allotment of CPSE shares to promoters so that government holding does not go down below 51 per cent.

As much as 75 per cent of the income from NIF is used to finance selected social sector schemes, while the rest is utilised to meet the capital investment requirements of profitable and revivable central PSUs.

However, because of the difficult economic situation caused by global slowdown, the government in November 2009 decided to utilise proceeds from disinvestment only for social sector spending. This exemption is applicable till March this year. As on August 31, 2012 the corpus in the National Investment Fund  stood at Rs 1,814.45 crore.