As part of its plan to create and launch 24 Exchange Traded Funds (ETFs) comprising stocks of the listed Central Public Sector Enterprises (CPSEs), the Ministry of Finance has initiated an inter-ministerial consultation process.
The Ministry of Finance has, on December 18, sent a draft note for inter-ministerial consultation. The departments concerned are requested to send their views by January 1, after which the note will be sent to the Cabinet Committee on Economic Affairs for its consideration.
Copies of the draft note has been sent to the Planning Commission, Department of Economic Affairs, Department of Expenditure, Ministry of Corporate Affairs, Department of Legal Affairs, Department of Public Enterprises, and the Prime Minister’s Office.
The proposed ETF that would be based on the shares of 24 profit-making CPSEs, is aimed at obtain better price for equity of state-owned companies during the disinvestment process.
The 24 companies would include blue-chip PSUs like ONGC, Indian Oil, Power Finance Corporation, NTPC, NMDC and BHEL. ICICI Securities is advising the Department of Disinvestment to finalise the creating and launch of the proposed ETFs. Earlier, the government had said that the CPSE ETFs would be launched early next fiscal year.
The Kelkar committee had also suggested that government should consider ETF comprising shares of PSUs with good financial track records.
An ETF tracks an index, a commodity or a basket of assets like an index fund, but trades like a stock on an exchange. ETFs were introduced in India in 2001. Currently, there are 33 ETFs having AUM (assets under management) of close to Rs 11,500 crore and held by 6.2 lakh investors. Gold ETFs dominate the ETF market in the country. Globally, ETFs have been growing at a rapid pace with an annual growth rate of over 34 per cent in the last decade, with Assets Under Management of $1.5 trillion at present.
