Govt plan to improve PSUs important for disinvestment, says Kotak

Longer term plan to improve performance of public sector undertakings (PSUs) is important for the government's divestment plan, Kotak has said in a report.

"In our view, the government may want to review its very ownership of PSU companies with a far bolder program of privatisation," the home-grown financial services major said in its note.

The government aims to raise US $9.5 billion via stake sale in state-run companies (or privatisation) in the current 2014-15 financial year to help plug its fiscal deficit.

Kotak added that piece-meal divestments would achieve little in terms of improving efficiency and returns for the government.

The financial services provider also said that the government's move to convert assets into income to meet current expenditure, without any consideration about the future will not be a good sign.

Kotak said it was best to put the money in separate funds that are used for current and future generations in a judicious manner.

Among the government's key divestments in the pipeline are Oil and Natural Gas Corp (ONGC), Coal India, NHPC, Steel Authority of India, Power Finance Corp and Rural Electrification Corp.

(Reuters)