PSU divestment is not to cut deficit, says Pranab

Mukherjee said the government would use a quarter of the stake sale funds for to revive ailing state-run firms and the rest for social schemes.

“I can assure the members, the intention is not to utilise the disinvestment proceeds to reduce the fiscal deficit but to utilise them for expenditure on the social sector schemes,” he said. Last month, the cabinet approved a rule change to use preceeds from divestments up to the end of 2011/12 to fund social schemes, in contrast to the previous practice of putting them in a National Investment Fund.

It was aimed at easing the pressure off the government as it struggles to manage a bloated fiscal deficit that is estimated to touch 6.8 per cent of gross domestic product by March 2010.

The government would return to the status quo after March 2012, Mukherjee said on Friday. Last month, a senior finance ministry official said the government has identified 10 listed and about 50 unlisted firms as candidates for stake sales. Since its re-election in May, the Congress-led coalition has revived divestment plans. It has had initial success with public offers in NHPC and Oil India that raised US$1.8 billion.

The government plans to sell shares in NTPC, Rural Electrification Corp and Satluj Jal Vidyut by the end of the current fiscal year in March 2010.