Previous Year Question
With reference to the National Investment Fund to which the disinvestment proceeds are routed, consider the following statements:
The assets in the National Investment Fund are managed by the Union Ministry of Finance.
The National Investment Fund is to be maintained within the Consolidated Fund of India.
Certain Asset Management Companies are appointed as fund managers.
A certain proportion of annual income is used for financing select social sectors.
Which of the statements given above is/are correct?
1 and 2
Only 2
3 and 4
Only 3
Correct Answer: C
Detailed Solution
The question concerns the original structure of the National Investment Fund, established in November 2005. Under that arrangement, proceeds from the disinvestment of Central Public Sector Enterprises were to be channelled into the NIF.
Its corpus was intended to be permanent, while income generated from investment of the corpus was to be used for specified purposes.
Statement 1 is incorrect. The assets of the NIF were not directly investment-managed by the Union Ministry of Finance. Selected public-sector Asset Management Companies were appointed as professional fund managers.
Under the original arrangement, the management responsibility was entrusted to:
UTI Asset Management Company Limited
SBI Funds Management Private Limited
LIC Mutual Fund Asset Management Company Limited
It is, therefore, inaccurate to say that the Union Ministry of Finance itself managed the NIF’s assets.
Statement 2 is incorrect. Under the original arrangement, the NIF was envisaged as being maintained outside the Consolidated Fund of India. The corpus was not ordinarily to be spent; the annual income earned from its investment was to be utilised for specified purposes.
The Government subsequently changed the structure and utilisation of disinvestment proceeds, but the question concerns the original arrangement.
Statement 3 is correct. Selected Asset Management Companies were appointed as fund managers for the professional management and investment of the NIF corpus.
Statement 4 is correct. Under the original NIF scheme, its annual income was to be divided as follows:
75 per cent for financing selected social-sector schemes promoting education, health and employment.
The remaining 25 per cent for meeting the capital-investment requirements of profitable and revivable Public Sector Enterprises.
Statements 3 and 4 are, therefore, correct.
Time context
The NIF policy was modified on several occasions after its establishment. The 75:25 allocation and corpus arrangement should consequently be understood in the context of the original policy relevant to this question, rather than as a permanent rule applicable to every present disinvestment receipt.