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Proposal for NIF awaits cabinet nod.

THE Cabinet Committee on Economic Affairs ( CCEA) will on Thursday consider a proposal to set up the National Investment Fund ( NIF).

The proposal, mooted by the department of disinvestment ( DoD), is aimed at ensuring that funds collected by the government through the sale of its equity in profit- making central public sector enterprises ( CPSEs) are not frittered away.

If the proposal gets the Cabinet's nod, disinvestment proceeds will be ploughed into the newlycreated corpus from the year 2013- 14, and can be used only specific purposes listed by DoD. These funds will be funneled into capital investment by the government in public enterprises, particularly in the financial sector institutions. At present, the disinvestment proceeds are routed into the Budget for meeting revenue expenditure, often resulting in wastage.

The Cabinet note drafted by the DoD takes note of this.

" Apprehensions have been expressed that the sale of government equity in profitable PSEs to finance the Budget deficit is not a prudent measure and erodes fiscal discipline and that the sale proceeds of capital assets should not be used to fund revenue deficit," it observes.

It has also been proposed that the government will set up an empowered group of ministers and an inter- ministerial group for approving the disbursement of NIF resources.

The disinvestment policy pursued by the government so far makes out a case for the sell- off of minority stake in profit- making CPSEs through public offerings, with the rider that the government retains at least 51 per cent equity and management control.

The CCEA, at its meeting, will also take up a proposal imposing a budgetary ceiling on annuity payments of projects being built on the privatepublic partnership ( PPP) model.

At present, PPP projects are constructed on the basis of two routes -- BOT ( Build, Operate and Transfer), and Engineering Procurement Contract basis. The Cabinet proposal, if it sails through, will devise a third route -- BOT annuity.

Cabinet Committee on Economic Affairs to consider the proposal to set up the National Investment Fund on Thursday


Buying shares issued by central public sector enterprises ( CPSEs), particularly banks and insurance companies, on rights basis in such a manner that 51% govt ownership in them is not diluted

Preferential allotment of shares of CPSE to promoters as per SEBI ( Issue of Capital and Disclosure Requirements) Regulations, 2009, so that govt shareholding does not dip below 51% in all cases where CPSE is going to mobilise fresh equity to meet its Capex Programme

Recapitalisation of public sector banks and insurance companies

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Publication:Mail Today (New Delhi, India)
Date:Jan 17, 2013
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