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The Congress led United Progressive Alliance (UPA) government’s victory in a trust vote in Parliament by a surprisingly large margin despite the withdrawal of support by the Left parties has emboldened the Government to push for many reforms that had been put on the backburner because of the Left’s opposition to the reforms.
The government is proposing a new round of liberalisation covering the banking, insurance, pension, and disinvestment.
Disinvestment
The left parties had opposed sale of government stake in profit making public sector companies. With the Left out of the way, the government is proposing to sell 10 percent stake in state owned Bharat Sanchar Nigam which provides fixed line and mobile services throughout India and has been consistently a profit making company.
An IPO by the state owned oil exploration and production company, Oil India, is likely to hit the market after October.
Next the government is proposing to sell some of its stake in several state owned power companies. These include National Hydroelectric Power Corporation North Eastern Power Corp, Tehri Hydroelectric power Corporation and Satlauj Jal Vidyut Nigam.
NHPC would hit the capital market for Initial Public Offer to raise Rs.16.70 billion fresh equity before Diwali in October. Besides, the government will also divest its five percent stake as part of disinvestment. The company has lined up whopping Rs.280 billion investment till 2012 to become over 10,000 MW utility from the present 5,200 MW generation capacity and the proceeds from the IPO would be partly utilised to finance the expansion.
Insurance
The government intends to raise the foreign equity limit in insurance companies to 49 percent from 26 percent. a promise made by the Finance Minister in one of his budget speeches but which could not be carried out because of the opposition of the left parties.
Banking
The Banking Regulation (Amendment) Bill introduced in Parliament in 2005 is likely to be revived. This will provide voting rights to private investors in nationalised banks in line with their shareholding. At present voting rights are capped at 10 percent, irrespective of shares held.
The government has also decided to reduce the stake in public sector banks. The government ownership in various banks ranges from 51 percent in Oriental Bnak of Commerce to 100 percent in Punjab and Sind Bank.
Pension
The government has allowed three private fund managers to manage the money in the Employees Provident Fund. This has drastically brought down the fees of managing the funds.
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