National Investment Fund

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 would be channelised. 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 CPSEs will be channelised into the National Investment Fund which 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% 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% 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 Asset Management Company Ltd.
	ii)	SBI Funds Management Company (Pvt.) Ltd.
	iii)	LIC Mutual Fund 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 crore in the year 2008-09, Rs.248.98 crore in the year 2009-10, Rs.107.32 crore in 2010-11 and Rs. 163.19 crores in 2011-12.

Use of Disinvestment Proceeds

The income from the Fund is to be used for the following broad investment objectives:

	(a)	75% to finance selected social sector schemes, which promote education, health and employment
	(b)	25% 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

However, in view of the difficult economic situation caused by the global slowdown of 2008-09 and a severe drought that was likely to adversely affect the 11th Plan growth performance, the Government, in November 2009, decided to give a one-time exemption to utilization of proceeds from disinvestment of CPSEs for a period of three years – from April 2009 to March 2012 – i.e. disinvestment proceeds during this period would be available in full for meeting the capital expenditure requirements of selected social sector programmes decided by the Planning Commission/Department of Expenditure. Now as the Country is facing very difficult economic conditions due to Continued financial/economic problems in Europe, impacting the economic growth in India, higher subsidy burden relating to petroleum, food and fertilizers, high Interest rate impacting the manufacturing sector, affecting excise collection, falling revenue collection, the exemption cited above has been extended upto March 2013.
 
Accordingly, from April 2009, the disinvestment proceeds are being routed through NIF to be used in full for funding capital expenditure under the social sector programmes of the Government, namely:-

	(i)	Mahatma Gandhi National Rural Employment Guarantee Scheme
	(ii)	Indira Awas Yojana
	(iii)	Rajiv Gandhi Gramin Vidyutikaran Yojana
	(iv)	Jawaharlal Nehru National Urban Renewal Mission
	(v)	Accelerated Irrigation Benefits Programme
	(vi)	Accelerated Power Development Reform Programme