Centre's disinvestment programme got a fillip with the Cabinet Committee on Economic Affairs' (CCEA) decision to allow the Power Finance Corporation (PFC) and Rural Electrification Corporation (REC) to buy back government shares. The move will generate Rs 793 crore for the exchequer.
Both PFC and REC have been allowed to buy 25 per cent of the government equity. This will amount to 21.3 lakh shares for PFC at Rs 2,710 per share and 17 lakh shares for REC at Rs 1,150 per share.
The buyback proposal had been pending long with the government and was scheduled to be cleared in the last financial year. The disinvestment revenue is crucial for the government in terms of curbing the fiscal deficit.
CCEA has also decided to introduce a credit guarantee scheme for small industries in fiscal 2000-2001. The scheme will be called Credit Guarantee Fund for Small Industries.
The fund will have a corpus of Rs 125 crore with the government contribution amounting to Rs 100 crore. The rest will be funded by the Small Industries Development Bank of India.
The scheme will guarantee both term loan and working capital up to Rs 10 lakh extended by commercial banks and well-performing regional rural banks to SSI units without collaterals including third party guarantee.
The credit guarantee funds will guarantee 75 per cent of the principal amount of the credit extended by the lender.
The lender will pay an upfront guarantee fee of 2.5 per cent of the loan and an annual service fee of one per cent of the loan outstanding at the end of each year.
The rate of interest charged by the lender from the borrower will not be more than 3 per cent over the prime lending rate excluding the annual service fee of one per cent.
There will be a lock-in-period of two years from the date of disbursement of the loan before the lender executing any claim on the fund. The fund will pay up 75 per cent of the guaranteed amount to the lender on preferring claim, recalling loan and initiation of recovery proceedings. The balance 25 per cent will be paid on conclusion of recovery proceedings by the lender.
In another meeting, the Cabinet approved amendments to the State Financial Corporation Act in an attempt to enlarge shareholders base of state financial corporations.
