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Economic Situation
Key Objectives
Small Scale Industry
Investment in Industry
Information Technology
Financial Sector
Capital Market
Expenditure Restructuring
Develop North East
Estimates for 1998
Assistance to States
New Schemes
Non Plan Expenditure
Revenue Receipts
Tax Proposals
Tax Revenues



Disinvestment/Privatisation/PSU Reform
53. The regular budget takes credit for a receipt of Rs.5,000 crore from disinvestment in the current year. In order to expedite the process the government have decided to disinvest specified portions of equity from IOC, GAIL, VSNL and CONCOR. As part of an overall strategy to restructure Indian Airlines and expand its capacity, government have decided to restructure the capital of Indian Airlines and also to undertake a phased disinvestment in this company, over three years, bringing the government's equity holding down to 49 per cent.

54. Some public sector undertakings have consistently incurred large losses. Experience and studies by independent organisations, have conclusively established them to be unrevivable. Nevertheless, a decision on their closure has been delayed only on account of the concern for the interest of the workers. In order to find a viable and satisfactory solution to this dilemma, the government have decided to provide a safety net to the workers of enterprises destined for closure by providing a liberal and attractive compensation package prior to closure. At present, when a unit is closed, the workers are only entitled to retrenchment compensation under the Industries (Development and Regulation) Act, which is only 15 days wages for each completed year of service.

To make the compensation package attractive, it is proposed to make applicable the benefits of VRS package, namely 45 days wages for each completed year of service, subject to the maximum wage or salary accruable on the basis of the balance of years of service left to all the workers of these public sector units. As a further improvement to the package, the workers of these units will also be eligible for a maximum of 60 months or 5 years salary or wages as compensation in the case of all those who have completed not less than 30 years of service. This would mean that all those who have put in more than 30 years of service will get more than the normal VRS. The other conditions of the VRS will apply and this offer will be made time bound.

55. A separate Restructuring Fund is being constituted for this purpose and these public sector enterprises will be advanced funds from the budget to offer a compensation package to the workers. Once the labour is separated, the assets of the company will be available for disposal at the best economic price. The proceeds of the disposal, after settling all pending liabilities, will be credited to the restructuring fund which will get recouped to that extent. This would enable the fund to operate on atleast a partially self-sustaining basis and it is expected that, in the course of time, budgetary support for the fund will gradually diminish.

56. Government have also decided that in the generality of cases, the government shareholding in public sector enterprises will be brought down to 26 per cent. In cases of public sector enterprises involving strategic considerations, government will continue to retain majority holding. The interest of workers shall be protected in all cases.


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