Millennium Post

Kelkar Committee suggests ETF route to boost retail investment

In order to encourage retail investors, the Kelkar Committee has suggested that government should consider floating exchange traded fund [ETF] comprising shares of only those PSUs which have good financial track records.
The committee also suggested that the government should also come out with share sale through ETF in small tranches to avoid price volatility.

These initiative, the committee headed by Former finance secretary Vijay Kelkar said, would also help the government in meeting its disinvestment target of Rs 30,000 crore.

'Initially, government may like to consider the option of creating a basket with securities having a good financial track record. This route may be attractive for retail investors and may be made available through multiple tranches reducing the risk of fluctuation of prices and also the impact cost for government,' the committee said in its report.

It said that shares of around 50 PSUs are listed on the bourses and in which the government may consider selling its minority stake.

Under the planned ETF model, the Department of Disinvestment [DoD] is planning to create a pool of shares of the PSUs it wants to divest and create a fund [ETF], which would be listed on stock exchanges.

The DoD, however, is yet to decide the quantum of shares in the PSUs, which are identified for divestment, that would be part of the proposed ETF.

The ETF, which is an investment fund traded on stock exchanges much like stocks, would have an underlying benchmark which could be an index on the stock exchange.

With nearly six months of the fiscal over, the government is yet to come out with stake sale offers of any PSU.

The budget target of Rs 30,000 crore, the panel said, could be met by the government by selling minority stakes in companies like SUUTI, Hindustan Zinc and Balco.

The committee said that in absence of adequate steps the government will be able to raise around Rs 10,000 crore, as against the target of Rs 30,000 crore this fiscal.
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