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Govt may use Rs 70 bn sell off money to retire public debt

Mamata Singh & Subhomoy Bhattacharjee

The government is likely to use Rs 70 billion of divestment proceeds in the next fiscal to retire public debt instead of for restructuring public sector units, as announced in the Budget.

While Rs 50 billion from the expected realisation of Rs 120 billion is committed for plan expenditure and will be released in the first supplementary of the year if the department of divestment manages to stick to its calendar of divestment, the allocation of the balance Rs 70 billion has been kept vague.

It has not been set off against any specific item in the expenditure Budget of the government, indicating that the allocation as spelt out by the finance minister was meant primarily to deflect criticism of the divestment plans.

Sinha had said in the Budget that the Rs 70 billion would be used for a three-pronged plan to restructure PSUs, provide a safety net to the workers retrenched and reduce public debt.

But in the pre-Budget meetings, the department of heavy industry had made a total projection of only about Rs 8 billion for the VRS package for public sector units. Moreover, the finance ministry and the Planning Commission are yet to work out any major restructuring plan for PSUs.

So, not only has the gross budgetary support for the plan been scaled down to Rs 950 billion, a rise of just eight per cent over the current fiscal, but also little money-other than what has been provided in the Budget-would be available either to finance restructuring of PSUs or provide a safety net to retrenched workers.

Sources said the modus operandi for restructuring was that the companies and the administrative ministries concerned would prepare financial plans during the course of the year and forward them to the Planning Commission and the finance ministry.

But since the government of India accounts do not provide one-to-one linkages and there is no way of knowing if a particular sum of money has come from divestment, sources said, the finance ministry would have an opportunity to delay restructuring plans and divert the funds for redemption of the public debt and thereby reduce the revenue deficit.

In the current fiscal, Yashwant Sinha had earmarked Rs 10 billion for reducing public debt. Since the Budget does not mention any specific sum for the next fiscal, the ministry will have greater leverage to meet the deadline set by the Fiscal Responsibility Bill.

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