New Delhi, Dec 31: The finance ministry seems to have become extremely ambitious about the money it can mop up through the twin instruments of buyback and warehousing of public sector undertakings' shares.The finance ministry has projected a mop-up of Rs 8,000 crore in the current fiscal (Rs 3,500 crore through buyback and Rs 4,500 crore through warehousing). But what is more, the top echelon of the ministry has proposed that this figure be doubled to a whopping Rs 16,000 crore through a neat piece of financial engineering.
What was proposed on Friday to finance minister Yashwant Sinha by the top echelon of North Block is that the Rs 8,000 crore mop-up should be used by the ministry to retire government bonds with banks and financial institutions. This will serve the objective of bringing down government debt and help reduce interest costs. The money, which will then come back to the banks, can be used again to warehouse more PSU shares. In this manner, the target mobilisation by the ministry can behiked to a staggering Rs 16,000 crore.
By selling shares to banks and FIs through this route, the ministry will apparently be able to fulfill three major objectives:
Bring down the fiscal deficit to respectable levels, Cut interest costs substantially. This, in turn, will make a difference to the deficit, and Take a significant chunk of PSU shares out of the `government system'.The ministry is also watching with keen interest the fate of the sale of IBP to another petroleum sector PSU. This amalgamation would serve the purpose of ensuring greater synergy in the sector while providing funds -- in the range of Rs 1,500 crore to Rs 2,000 crore -- for the central exchequer. The ministry plans to complete the IBP transaction before the end of this fiscalIn fact, a core team in the ministry is looking at similar propositions in other sectors of the economy and it is possible that a round of mergers and acquisitions among public sector companies may be triggered within the next twomonths.
A finance ministry official was in Mumbai earlier this week to discuss the modalities of warehousing and buy back of PSU shares.
A meeting between union government officials and heads of the major finanncial institutions also took place at North Block recently. Several issues relating to losses and gains out of the warehousing exercise, the period of time for which shares will be warehoused and the extent of discount to be given on the market price of PSU shares to those who will warehouse have been hammered out. The ministry is now expected to empower FIs to initiate modalities for strategic sale of warehoused shares in the secondary market.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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