The Govt needs to pursue disinvestment, including privatisation, as an objective by itself instead of linking it to revenue receipts and meeting the fiscal target The Department of Investment and Public Asset Management (DIPAM) is in a war of words with the Ministry of Finance (MoF) over the proceeds of disinvestment of the Government’s shareholding in Central Public Sector Undertakings (CPSUs) during 2020-21. The point raised by the DIPAM is that out of the Rs 2,10,000 crore target fixed in the Union Budget, a big slice of Rs 90,000 crore, was thrust upon it by the MoF as being the projected proceeds from the sale of 10 per cent shares in the Life Insurance Corporation (LIC) and its residual stake...
More
Comments are closed
Category: PSU reforms & dis-investment
Disinvestment – chasing a mirage
Reportedly, the Department of Investment and Public Asset Management (DIPAM) which deals with all matters relating to management of Union Government investments in equity including disinvestment of its shareholding in Central Public Sector Undertakings (CPSUs) is in a war of words with the Ministry of Finance (MoF) over the target of proceeds of disinvestment during the current financial year (FY) i.e. 2020-21. In the Union Budget for 2020-21 presented on February 1, 2020, the Finance Minister, Nirmala Sitharaman had set the target at Rs 210,000 crore – a steep increase over the revised estimate (RE) for FY 2019-20 at Rs 65,000 crore (the actual for that year was even lower at about Rs 50,000 crore). The point raised by DIPAM...
More
Comments are closed
Don’t squeeze PSUs
The Govt should collect money from all those who owe it instead of squeezing CPSEs for bridging fiscal gaps. This is neither healthy for the economy nor good for the enterprises The Department of Investment and Public Asset Management (Dipam) has come out with a circular requiring Central Public Sector Enterprises (CPSEs) to pay interim dividend every quarter or half-yearly, depending on whether it is a relatively higher dividend (100 per cent or Rs 10 on a share of Rs 10) or less. Even those which can’t pay the prescribed “minimum” must give an interim dividend. Further, at least 90 per cent of the projected annual dividend should be paid as interim. Even as the bureaucrats justify this in terms...
More
Comments are closed
Don’t squeeze PSUs for fiscal gains
Vide a letter addressed to the central public sector enterprises (CPSEs) the department of investment and public asset management (Dipam) under Ministry of Finance has asked (i) enterprises which pay relatively higher dividend (100% or Rs 10/- on a share of Rs 10/-) may consider paying interim dividend every quarter after declaration of quarterly results; (ii) enterprises which pay less than 100% may consider paying interim dividend usually on half-yearly basis; (iii) those which can’t pay as per the prescribed ‘minimum’ should pay interim dividend during October/November each year based on projected profit after tax (PAT) following second quarter (July – September) results. All CPSEs should consider paying at least 90% of projected annual dividend, in one or more installments, as...
More
Comments are closed
Checks and balances
Crony capitalism has also happened in public sector banks. There is a dire need to strengthen regulatory oversight to guard against irregularities in running all banks The recommendation of an Internal Working Group (IWG) set up by the Reserve Bank of India (RBI) to allow industrial houses to own banks — if they meet the criterion — has invited strident criticism from experts, including the former RBI Governor Raghuram Rajan. Asking how a borrower could also be a lender, they have debunked the idea, stating that this would lead to misdirected lending, mostly to entities belonging to the industrial house that owns the bank. This apprehension is valid but the misuse of public money can happen in any bank, irrespective of the...
More
Comments are closed
Banking reforms – can borrower also be a lender
An Internal Working Group (IWG) set up by the Reserve Bank of India (RBI) has made far reaching recommendations in regard to ownership guidelines and governance structures of private sector banks. These include inter alia (i) allowing their promoters hold 26% equity stake in steady state or after 15 years (up from existing norm of 15%) from the start when it should be a minimum of 40% of the equity for the first five years; (ii) take a sympathetic review of whether industrial houses should be allowed to own banks if they meet the fit and proper criterion; (iii) allow non-bank finance companies (NBFCs) with assets of > Rs 50,000 crore, and in operation for over 10 years, to convert...
More
Comments are closed
Bite the BIC bullet
The ailments afflicting PSBs won’t go away so long as majority ownership and control remain with the Government. There is a dire need to unshackle them and grant autonomy to the management The Reserve Bank of India (RBI) has recommended to the Centre a reduction in shareholding of the latter in six top Public Sector Banks (PSBs), namely the State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Canara Bank, Union Bank of India (UBI) and Bank of India (BOI) to 51 per cent in the next 12-18 months. At a recent meeting with the Ministry of Finance (MOF), the RBI had argued for reduction in stake to 26 per cent. But, observing that this might...
More
Comments are closed
Snap the stranglehold
The only way to avoid delay and expedite the process of privatisation of Central PSUs is to unshackle them from bureaucratic red tape Finance Minister Nirmala Sitharaman has announced the broad contours of the Narendra Modi Government’s plans on privatisation of Central Public Sector Undertakings (CPSUs). A CPSU is defined as an undertaking in which the Union Government has shareholding of more than 50 per cent and by virtue of this, exercises majority ownership and control (there were 249 operating CPSUs as on March 31, 2019). Its privatisation means the shareholding of the Centre will be brought down to below 50 per cent. Before we look at the plan and how the Government goes about implementing it, it may be worthwhile to...
More
Comments are closed
PSBs – give charge to a holding company
Reportedly, the Reserve Bank of India (RBI) has recommended to the Government of India (GOI) reduction in the shareholding of the latter in six top public sector banks (PSBs) viz. State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Canara Bank, Union Bank of India (UBI) and Bank of India (BOI) to 51% in the next 12-18 months. In a recent meeting, the RBI had suggested reduction in GOI stake to 26% in PSBs. But, for now, its recommendation is to cut the stake to 51%. Given its precarious financial position (courtesy, Covid – 19), the union government is exploring all possible avenues for increasing revenue. In this larger perspective, it is looking to monetize its...
More
Comments are closed
Privatization – unshackle the process
The finance minister, Nirmala Sitharaman has recently announced the broad contours of Modi government’s plans on privatization of the Central public sector undertakings (CPSUs). A CPSU is defined as an undertaking in which the Government of India (GOI) has shareholding of more than 50% and by virtue of this exercises majority ownership and control (currently, there were 249 operating Central PSUs as on March 31, 2019). Its privatization means the shareholding of GOI will be brought down to below 50%. Which of the CPSUs will be privatized? To determine this, the undertakings will be divided in to two broad categories viz. ‘strategic sector’ and ‘non-strategic’. Whereas, all undertakings in the non-strategic sector will be privatized, in the strategic sector too, the...
More
Comments are closed