Proceeds of Disinvestment

The proceeds of disinvestment go into National Investment Fund (NIF), which was setup in 2005. The purpose of the fund was to receive disinvestment proceeds of central public sector enterprises and to invest the same to generate earnings without depleting the corpus. The earnings of the Fund were to be used for selected Central Social Welfare Schemes. This fund was kept outside the Consolidated Fund of India.

In 2013, NIF was restructured and it was decided that the entire disinvestment proceeds will be credited to the existing ‘Public Account’ under the head NIF and they would remain there until withdrawn/invested for the approved purpose. The allocations out of the NIF will be decided in the annual Government Budget.

Proceeds from NIF are utilized for following purposes:

♤ Subscribing to the shares being issued by the CPSE including PSBs and Public Sector Insurance Companies, on rights basis so as to ensure that 51% ownership of the Government in those CPSEs/PSBs/Insurance Companies, is not diluted.

♤ Preferential allotment of shares of the CPSE to promoters as per SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 so that Government shareholding does not go

down below 51% in all cases where the CPSE is going to raise fresh equity to meet its Capex programme.

♤ Recapitalization of public sector banks and public sector insurance companies.

♤ Investment by Government in RRBs/IIFCL/NABARD/Exim Bank.

♤ Equity infusion in various Metro projects.

♤ Investment in Bhartiya Nabhikiya Vidyut Nigam Limited and Uranium Corporation of India Ltd.

♤ Investment in Indian Railways towards capital expenditure.

There are various ways for disinvestment like Strategic Sales, warehousing, buy-back equity, private placement and other instruments of capital market etc.