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PSEs permitted to invest 30 p.c. in MFs

NEW DELHI: In a move that is likely to cheer the capital market, the Cabinet Committee on Economic Affairs on Thursday approved a proposal permitting public sector enterprises (PSEs) to invest up to 30 per cent of their surplus cash in mutual funds.

The far-reaching measure that could result in a flow of over Rs. 60,000 crore into the buoyant markets was, however, given the nod by the CCEA with a condition that the funds would be routed only through funds managed by public sector financial institutions.

Briefing newspersons here after the CCEA meeting, Information and Broadcasting Minister P. R. Dasmunsi said: “Navratna and ‘Miniratna’ companies will be allowed to invest 30 per cent of their surplus funds in public sector mutual funds. The permission is for one year and the decision would be reviewed on the basis of experience gained.”

The total surplus of Central PSEs was Rs. 2,39,535 crore in 2005-06 and the bulk of this huge amount was held by Navratna and Miniratna companies. Mr. Dasmunsi noted that it would be left to the boards of individual PSEs to decide on the guidelines, procedures and management control systems for investment in public sector MFs, albeit in consultation with their administrative Ministries.

The facility, he said, would provide a level playing field to the PSEs as against private sector entities for investment in MFs.While the relaxation would provide massive funds to public sector MFs like the Life Insurance Corporation of India, UTI, State Bank of India and Canara Bank for onward investment in the stock market, it would also lessen the sway of foreign institutional investors (FIIs) which can play the market by virtue of large funds at their disposal.

Disinvestment

In another decision, the Cabinet approved the tabling of the much-delayed status report on the disinvestment process in Parliament in the coming monsoon session. The ‘White Paper on Disinvestment’ that has been in the making since the UPA regime took over is being tabled following sustained pressure by the Parliamentary Standing Committee on Finance, Mr. Dasmunsi said.

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