Govt to facilitate FDI in health, education: Montek

New Delhi, Nov 28 (UNI) Clarifying doubts on government policy, Planning Commission Deputy Chairman Montek Singh Ahluwalia said the Centre will create a more conducive environment for private sector investment in health and education, move ahead with financial sector reforms and dilute government equity in public sector enterprises through the IPO route.

These remarks from Dr Ahluwalia came in response to questions raised by participants at the ongoing 22nd India Economic Summit, jointly organised by the World Economic Forum and CII, here yesterday.

The Plan Panel Deputy Chief, however, showed reluctance on the issue of divestment, saying that it was politically a sensitive matter.

''Privatisation would imply selling government equity. This is difficult and the official policy is that profit-making PSUs would not be divested. But there is abundant scope for bringing down government stake by issuing fresh equity through the IPO route,'' he said.

Dr Ahluwalia said given the political hitches it was not worth its while to go in for privatisation. But the private sector can expand by leaps and bounds and even occupy a bigger place than the public sector by growing faster and through sale of new equity in the public sector.

He admitted that there was strong political resistance to raising FDI caps in insurance from 26 per cent to 49 per cent, but said other aspects of reform of the financial services could go on. In this connection he cited increasing the size of the corporate debt market.

Dr Ahluwalia, however, said that without substantial financial sector reforms it would not be possible to achieve a nine per cent growth in the eleventh plan period (2007-11).

The eminent economist said there were no major restrictions on private sector investments in the health sector or making profits from it. However, there were restrictions on making profits in the field of education, the existing policy being that returns in this sector should merely cover costs.

Dr Ahluwalia said the needs of both the health and education were so huge that much bigger private sector investments alone can enable fulfilling the needs of the growing populace.

About profits from the education sector, Dr Ahluwalia said the Commission was awaiting the report of the Knowledge Commission and would give a fresh look to the entire issue. The Approach Paper to the next Plan has argued against restrictions of this kind.

Dr Ahluwalia was hopeful that the NDC at its meeting on December 9, 2006, would clear the Approach Paper.

He said the quality of public sector delivery in social sectors leaves much to be desired. It was critical to improve upon this, he added.

Dr Ahluwalia outlined the Approach to the Eleventh Plan, which has been cleared by the Cabinet. This would involve stepping up agricultural growth rate from two per cent to four per cent, thrust to the development of infrastructure and emphasis on social sector development.

UNI GS PKS DB0954