MoF moots unbridled MF choice for PSUs
North Block favours investment in private funds too, leaving equity-debt mix decision to ministries.
NEW DELHI: The finance ministry is pitching for more autonomy to public sector blue-chip companies when it comes to decisions on investing their surplus funds. The ministry is of the view that the PSUs should be allowed to invest in any mutual fund, whether public or private.
North Block is also against fixing a cap on the percentage that could flow to equity and debt mutual funds, and is of the opinion that investment decisions of PSUs on options like equity and debt should be guided by parent ministries based on the companies’ financial strength.
Blue-chip PSUs, the likes of ONGC, SAIL, Bhel and IOC, are sitting on huge cash reserves of over Rs 2,50,000 crore. A proposal to allow the companies to invest in mutual funds was considered by the Cabinet on May 17. The proposal was sent to a committee of secretaries to work out the details of the investment pattern.
The department of public enterprises, however, is opposed to the idea of allowing the companies to invest in mutual funds floated by private sector entities. It also wants the investments in debt mutual funds to be capped at 25% of the total surplus and equity mutual funds at 10% of the total surplus.
The finance ministry, which supports the idea of allowing PSUs to park their surplus in mutual funds floated by private sector, contends that all mutual funds have the same regulator, Sebi.
ADVERTISEMENT
“The country has a well-regulated environment for mutual funds, so there is no point in making such a distinction,” a government official said. The committee of secretaries will take a final view on the issue and new guidelines would be issued soon.The stock market will receive a boost if even a small fraction of the total surplus flows to it. Thus, even if the government decides to stick to the department of public enterprises’ suggestion of a cap of 10% for equity funds, the move will positively impact the stock market. It would also allow PSU companies to benefit from a booming equities market.
Although profitable PSUs generate a huge cash surplus every year, they can park it only in fixed deposits of public sector banks or government securities.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
Download
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
The Economic Times News App for Quarterly Results, Latest News in ITR, Business, Share Market, Live Sensex News & More.
ADVERTISEMENT
