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Selling PSUs, best option to raise money: ASSOCHAM

Written by: Staff

New Delhi, June 6 (UNI) The Associated Chambers of Commerce and Industry (ASSOCHAM) today mooted a proposal for revenue raising through IPO route, advising the Centre and states to divest their stake in 1188 PSUs by offering their shares to retail investors and banks.

In a paper on 'Revenue Raising through IPO route', the chamber has stressed that there are about 242 central public sector enterprises and 946 state level public enterprises and department undertakings with abilities to implement change in the financial sector.

Both the Centre and state governments, therefore, should divest their stake in such PSUs by offering their shares for sale to the banks and retail investors as it will ensure the world class phase development and expansion through timely provision of high quality infrastructure.

''The PSUs, if offer their shares through IPO route will automatically get freed from the constraints of government rules to react more quickly to team up with business partners to develop up market products to meet changing demands'', ASSOCHAM President Anil K Agarwal said.

''Such PSUs will have the freedom to reinvest their revenues to research and development to produce more value added services and provide more staff training as also have greater flexibility recruit staff with necessary expertise such as in marketing and research and development and enhance their efficiency through greater accountability of costs and benefits of operation and management responsibility,'' he added.

The paper has also suggested that both centre and state governments can make offers for sale to the public at discounted price. This would bring the public participation in the company and listing of these companies shares on stock exchanges.

This in view of the chamber will ensure good governance in the management of these companies and generate revenue for the government in the form of dividend income and capital gain on disinvestment of equity.

It also highlighted that if divestment of government equity in PSUs through IPO route is effected, it would expose the privatised companies to market discipline, thereby force them to become more efficient and survive on their own financial and economic strength or cease. Such companies will also be able to respond to market forces much faster and cater to their business needs in a more professional manner.

Opening up of public sector to appropriate private investment would increase economic activities and have an overall beneficial effect on the economy, employment and tax revenues in the medium to long term, the paper said.

Wider distribution of wealth would also be possible through offering of shares of privatised companies to small investors and employees, feels the chamber.

It is also of the view that in many areas, the end of public sector monopoly would bring relief to consumers by way of more choices and cheaper and better quality of products and services as has already started happening in the telecom sector.


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