BCCI favours holding company for PSUs

The Centre should float a wholly owned company that will hold its stake in various public sector undertakings, the Bombay Chamber of Commerce and Industry (BCCI) said in a letter to the finance minister on the issue of strengthening the state-owned companies.

The BCCI is of the opinion that profits, assets and proceeds from disinvestment of non-strategic public sector units should accrue to this 'company' and not go into the Consolidated Fund of India (CFI).

The funds generated from the sale could then be utilised for restructuring other PSUs and improving their asset value.

This would also reduce government subsidies and bailouts. Dividend to the government and tax on profits would, however, accrue to the CFI.

Citing the Singapore example, BCCI said, Temasek Holdings Pte Ltd, which holds shares of strategic PSUs on behalf of the Singapore government, has a large number of profitable undertakings within its fold including the Development Bank of Singapore and Port of Singapore.

According to the chamber, creation of the a holding company would require dilution of government-held equity through sale of shares or by enhancing the capital base of the PSU by sale of additional shares by way of a public offer.

"This would have a positive spin-off effect. It will increase the financial base of the PSUs, thereby enabling them to raise additional debt and strengthen their economic fundamentals. Professionalisation of PSU management would be automatic under this dispensation," Ashwini Kakkar, president, Bombay Chamber of Commerce and Industry, said.

While appreciating the government's resolve to give full managerial and commercial autonomy to successful, profit-making public sector units, the body felt that PSUs deserve to be nurtured with additional resources and be allowed to operate in a framework which is conducive to good performance and meeting their commercial and non-commercial objectives.