Q.15 Write a note on the current policy regarding the use of disinvestment proceeds and also justify the same.

Ans. The current policy regarding the use of the disinvestment proceeds are of January 2013. The proceeds of disinvestment proceeds with effect from the fiscal year 2013–14 are credited to the existing ‘Public Account’ under the head NIF and they remain there until withdrawn/invested for the approved purpose—to be decided by the Union Budgets. Currently, the proceeds are used for the following purposes:

(i) Subscribing to the shares being issued by the CPSE including PSBs and Public Sector Insurance Companies, on rights basis so as to ensure government ownership in them at 51 per cent.

(ii) Recapitalization of public sector banks and public sector insurance companies.

(iii) Investment by Government in RRBs, IIFCL, NABARD, Exim Bank;

(iv) Equity infusion in various Metro projects;

(v) Investment in Bhartiya Nabhikiya Vidyut Nigam Limited and Uranium Corporation of India Ltd.;

(vi) Investment in Indian Railways towards capital expenditure.

Till the Union Budget 2017–18 was presented we find the GoI following the same policy to use the proceeds of disinvestment—using the funds for acquiring new assets (for capital expenditures). The policy looks suitable to the time as capital expenditures have been shrinking due to lower investment coming from the ‘debt-stressed’ and ‘profit-hit’ private sector. As the policy is to be decided by the Union Budget, it gives enough flexibility to the government.