On 27 January 2005, the Government had decided to constitute a “National Investment Fund” (NIF) into which the realization from sale of minority shareholding of the Government in profitable CPSEs (Central Public Sector Enterprises) would be channelized. The Fund would be maintained outside the Consolidated Fund of India.
The income from the Fund would be used for the following broad investment objectives: -
(a) Investment in social sector projects which promote education, health care and employment; (b) Capital investment in selected profitable and revivable Public Sector Enterprises that yield adequate returns in order to enlarge their capital base to finance expansion/ diversification.
Salient features of NIF:
(i) The proceeds from disinvestment of Central Public Sector Enterprises will be channelized into the National Investment Fund that is to be maintained outside the Consolidated Fund of India.
(ii) The corpus of the National Investment Fund will be of a permanent nature.
(iii) The Fund will be professionally managed to provide sustainable returns to the Government, without depleting the corpus. Selected Public Sector Mutual Funds will be entrusted with the management of the corpus of the Fund.
(iv) 75 per cent of the annual income of the Fund will be used to finance selected social sector schemes, which promote education, health and employment. The residual 25 per cent of the annual income of the Fund will be used to meet the capital investment requirements of profitable and revivable CPSEs that yield adequate returns, in order to enlarge their capital base to finance expansion/diversification.
Fund Managers of NIF
The following Public Sector Mutual Funds have been appointed initially as Fund Managers to manage the funds of NIF under the ‘discretionary mode’ of the Portfolio Management Scheme, which is governed by SEBI guidelines.
i) UTI Assets Management Company Ltd.
ii) SBI Funds Management Company (Pvt.) Ltd.
iii) Jeevan Bima Sahayog (LIC), Asset Management Company Ltd.
CORPUS OF NIF
The corpus of the Fund is Rs.1814.45 crore being the proceeds from the disinvestment in Power Grid Corporation and Rural Electrification Corporation. The pay out on NIF was Rs.84.81 crores in the first year. The payout received in the second year was Rs.209.24 crores. Average income of first year was 8.47%. Average income of second year was 10.02%. Thus, the average income was 9.245% against the hurdle rate of 9.25%.
Restructuring of NIF
In view of the deceleration of GDP growth due to global economic downturn coupled with unprecedented drought this summer, we are facing a reduced budgetary resource generation possibility. To ensure that this does not negatively impact the growth of economy; Government has approved (on 5th November, 2009) one-time exemption permitting full utilization of disinvestment proceeds deposited in the National Investment Fund, over this and the next two Financial Years, in meeting the capital expenditure requirements of selected social sector programmes decided by the Planning Commission/Department of Expenditure. The status quo ante will be restored from April 2012.