Millennium Post

Government to meet on Sovereign Fund

The government will hold a meeting on 9 May to decide on setting up of proposed Sovereign Fund of India that could be used, among other things, to buy overseas assets for the benefit of the state-owned companies.

'A meeting of secretaries of 10 government departments to decide on the nature of the Fund is slated on May 9. After this, the proposal has to be vetted by the union cabinet,' a top government official said.

Secretaries in the ministries of finance, public enterprises, petroleum and natural gas, and power would be attending the meeting, which will be headed by cabinet secretary.

Besides other things, the meeting will decide on the management of the corpus of the fund. The government will have to take a call on whether the fund would be managed by the selected public sector mutual funds or the centre, the official added.

As per the proposed structure, the disinvestment corpus will be used for investing in energy and raw material needs, recapitalisation of PSUs and National Investment Fund (NIF).

'The DoD has proposed that the disinvestment proceeds be split into the three categories equally,' the official added.

Currently proceeds from disinvestment of CPSEs are channelised into the NIF which is maintained outside the Consolidated Fund of India.

Prior to the global economic crisis in 2008-09, 75 per cent of the corpus of NIF are utilised for social sector schemes and 25 per cent for revival for sick PSUs. The NIF corpus is managed by three asset management companies - UTI AMC, SBI Fund Managers and LIC AMC.

However, since November 2009, the disinvestment proceeds are entirely routed to Consolidated Fund to be used for funding social sector schemes.

Although the proposed Sovereign Fund is unlikely to be set up before April 1, 2013, the disinvestment department of the finance ministry is trying to put across the proposal of efficient utilisation of the proceeds from PSU stake sale so that even the state-owned companies can obtain funds in times of need.

The government has set a disinvestment target of Rs 30,000 crore for the current fiscal. As against the budgeted target of Rs 40,000 crore for 2011-12, the government could garner only Rs 14,000 crore.
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