Govt eyes PSU money to bridge deficit

first, the cash-strapped finance ministry set its sights on the reserves of profit-making psus shortlisted for divestment. now, as a policy, it has decided to transfer the free reserves of all psus which do not have immediate investment plans. the rationale behind such transfers is to rein in the fiscal deficit as close as possible to the budgeted level of 4.7 per cent of the gdp in 2001-02. and it is because of this hidden cushion, thought up by the expenditure department, that the government is less concerned about the slippage in the fiscal deficit target. thus, while the general impression is that, assuming current rates of revenue divestment receipts, the overall shortfalls would be to the tune of rs 30,000 crore, the finance ministry has been downplaying the crisis. at his first open house session with the media recently, finance minister yashwant sinha had stated that though there would be some slippage in the fiscal deficit targets, it would certainly not be in the range of rs 30,000 crore, roughly 1.5 per cent of the gdp. the final format for the transfer of free reserves and identification of the psus from which the transfers would be made is still being worked out; several alternatives are being considered, including buyback, special dividends and bonus. sources said some of the psus on the ministry's watchlist include vsnl, aai, engineering projects india ltd. the reserve bank of india too could be on the government's hit list, considering its reserves have increased substantially in recent years as a result of managing the country's foreign exchange reserves of over $45 billion, managing the treasury for the government and out of interest earnings — paid by the government to the rbi — on the devolvement of government securities. however, the main catch here is that rbi has already transferred rs 9,000 crore to the government, the same as last year. only, the transfers are different from the government's point of view since budget 2000-01 had pegged rbi's dividends at rs 6,000 but had ended earning an additional rs 3,000 crore. this had created an unexpected cushion to the ministry to adjust against revenue shortfalls. however, this year, the budget assumed a dividend payment by the apex bank of rs 9,000 crore, which is the same as the sum already remitted. hence for unexpected gains, the government would have to dip further into the profits that the central bank makes from its diverse operations. the finance ministry has also mounted pressure on psus to remit at least 20 per cent dividends to the government. some psus have been unable to do so as they have clocked merely book profits. this is particularly so in the case of coal and power psus whose balance sheets look strong but the cash actually does not exist because of non payment of dues by the sebs. finance ministry officials say that this fact has to be borne in mind while shortlisting psus for transfer of their free reserves too.

Govt eyes PSU money to bridge deficit

<img src=/photo.cms?msid=670301686 align=left>FIRST, the finance ministry set its sights on the reserves of profit-making PSUs shortlisted for divestment. Now, it has decided to transfer the free reserves of all PSUs which do not have immediate in...

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