Financial Daily from THE HINDU group of publications
Monday, Aug 12, 2002
Money & Banking - Financial Institutions
Industry & Economy - Disinvestment
Rethink on UTI, IFCI,IDBI privatisation Govt to exit only after revival
NEW DELHI, Aug. 11
THE Government is now veering around to the view that any proposal for privatisation of UTI, IFCI and IDBI should be carried out only after there is a turnaround in the performance of these three institutions, according to senior Government officials.
The Government's rethinking on the future of these three institutions was indicated by the Finance Minister, Mr Jaswant Singh, at the meeting of the Group of Ministers last week. The fate of these institutions was discussed at that meeting, although a large part of the meeting was devoted to the proposed restructuring of UTI.
The broad message which was being sent out was that the Government would exit from these institutions only after they are "nursed back to health.''
In other words, the Minister had indicated that there would not be any distress sale involving these institutions, officials said.
According to officials who attended the GoM, however, a timetable would be set out shortly for achieving this objective of turning around these institutions and also for pursuing their privatisation later.
To begin with, a new management team might be installed in all these three institutions to achieve the objective.
The new strategy which is being thought of could imply that the Government may infuse some more funds for these institutions to help stage a revival.
Besides UTI, IFCI is also in dire need of funds to fulfil its borrowing commitments. Last week, the Government provided guarantees aggregating close to Rs 800 crore to help IFCI redeem part of its borrowings. Early last month, the Finance Ministry had provided a guarantee of Rs 1,000 crore to help UTI borrow and meet its commitment on a couple of assured return schemes.
The Ministry reckons that the capital of IDBI would also need to be bolstered by about Rs 500 crore.
Although the option of raising funds through a public offering either in the international or in the local markets still exists for IDBI, considering the battering the institution had received in the last couple of years, this option could be ruled out, officials said.
The strategy now being thought of may not preclude UTI from making the transition towards a three-tier structure.
This would involve the setting up of a new sponsoring company, a board of trustees and then an asset management company.
With the GoM having provided the broad directions for these institutions, the Ministry will shortly start working out the details of the proposed restructuring including the repeal of the UTI Act.
The current thinking appears to be at variance with the strategy adopted by the previous finance minister, who before his exit, had approved of drastic changes in the restructuring of UTI.
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