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– Kamal Narang

The Home Minister, Mr P. Chidambaram, addressing media persons on Cabinet and CCEA decisions, in the Capital on Friday.

Our Bureau

New Delhi, Dec. 26 Navratna and miniratna public sector enterprises can continue to park up to 30 per cent of their surplus funds in equity mutual fund schemes of public sector mutual funds.

The Cabinet Committee on Economic Affairs (CCEA) on Friday reviewed the existing scheme and gave its nod to extend its validity till further orders. The extension has begun from August 1.

This move is seen as a positive development for public sector mutual funds, some of whom were hit hard by redemption pressures in the recent months.

In August 2007, the Government had removed a restriction prohibiting the navratnas and miniratna public sector enterprises from investing their surplus funds in equity mutual funds. It was then announced that this arrangement would be reviewed after one year.

“CCEA today reviewed the position and extended the scheme from August 1, 2008 till further orders,” the Union Home Minister, Mr P. Chidambaram, told reporters here after a CCEA meeting.

Ever since the Government guidelines allowed navratna and miniratna companies to park their surplus funds in equity schemes of public sector mutual funds, blue chip companies like ONGC, BHEL and NTPC have used this route for investing their surplus funds.

In the recent years, public sector enterprises (PSEs) operate at par with commercial enterprises.

Until the guidelines were changed in August 2007, the thrust of the earlier norms on investment of surplus funds of PSEs was that they should invest their surplus funds only in instruments with maximum safety, with no element of risk on the yield obtained from such investments.

However, it was contended that the restrictive clauses on investment would deny them profitable investment opportunities in instruments like mutual funds.

The Government noted that public sector enterprises had professional management and/or access to professional management services and hence were capable of taking investment decisions in their best interest.

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