PSUs can stay invested in MFs; exporters get Rs 350-cr package

NEW DELHI: The government on Friday allowed well-run public sector companies to continue investing up to 30% of their surplus cash in stock markets via state-run mutual funds, providing a welcome relief for these funds that have been hit hard by redemption pressure. The decision by the Cabinet committee on economic affairs (CCEA) extends a provision introduced in 2007 for these navratna and mini-ratna companies to invest in select funds. That scheme was due for a review.

Home minister P Chidambaram told reporters in the past these state-run companies could not take any risks with their investments and only allowed to invest in financial instruments with maximum safety, which denied them a profitable investment opportunity. This was considered restrictive.

���(These companies) have professional management... and hence are capable of taking investment decisions in their best interest,��� he said.

In other decisions, the CCEA decided to give 5% interest subsidy for home loans up to Rs one lakh for the urban poor.

It approved the allocation of Rs 350 crore to the Export Credit Guarantee Corporation of India, giving additional risk cover to exporters among micro, small and medium enterprises. This will increase the risk cover to MSME exporters from 85% to 95%. For banks financing such exporters, the risk cover has been enhanced to 85% from 75% now.

The CCEA also gave its approval to a rights issue proposal of Suzlon Energy. The approval will allow Suzlon to issue equity to its existing shareholders, including persons living outside India, for an amount not more than Rs 1,800 crore.

The government has also approved an outlay of Rs 6,000 crore during the 11th plan to repair, renovate and restore a wide variety of water bodies across the country. It approved a revival package for loss-making National Projects Construction Corporation that entails conversion of Rs 219 crore worth of loans with interest into equity. The Cabinet also cleared a civil aviation ministry's proposal to revise the air services agreement between India and South Africa. It can spur trade, investment, tourism and cultural exchange between the two countries, he said.