Public CompanyRs 2k-cr divestment corpus gives poor returns in 2008-09
At a time when the finance ministry is abuzz with talks of divestment, the existing disinvestment corpus -- the National Investment Fund (NIF) -- has managed to give only single-digit returns.
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Notified in October 2007, management of NIF’s corpus was entrusted with three public sector mutual funds -- SBI Mutual fund, UTI Mutual Fund and LIC Mutual Fund -- which have posted returns in the range of 8-9.75 per cent in the last financial year.
At present, NIF has a corpus of around Rs 2,000 crore from the divestment of two PSUs -- Power Grid Corporation and Rural Electrification Corporation. Out of the total corpus, SBI Mutual Fund and UTI Mutual Fund manage close to Rs 600 crore each, while LIC Mutual Fund manages the rest Rs 778 crore.
According to sources, while SBI Mutual Fund has given returns in the range of 8-9 per cent, LIC Mutual Fund has posted 9-9.75 per cent and UTI Mutual Fund 8-9.5 per cent.
"The returns have clearly not been great. Even when bond yields were going down and debt funds were putting up a good show last year, these funds have only given average results,” said a source, who did not wish to be named.
While guidelines on investment of NIF corpus were not in public domain, sources said that a huge chunk of the money was invested in debt and a small portion in equity.
When seen in contrast, fund managers of the New Pension Scheme (NPS), SBI and UTI, have delivered returns of 16.5 per cent and 13.5 per cent, respectively. Even gilt funds, which predominantly invest in government securities, have given returns of more than 13 per cent in the last financial year.
Now, there have been talks of dissolving NIF and putting the proceeds in the Consolidated Fund of India as the government is gearing up to tackle rising fiscal deficit.
Outlining the objectives of NIF, the government had said that 75 per cent of the annual income of the fund would be used to finance selected social sector schemes that promoted education, health and employment. The residual 25 per cent was to be used to meet capital investment requirements of profitable PSUs.
With the Left not being there in the new government at the Centre, experts are hopeful that disinvestments in various public sector undertakings (PSUs) will happen sooner than later. The ones that are said to be next on the disinvestment list are NHPC, Oil India and RITES. The government will raise more than Rs 6,500 crore via stake sales in these companies.