Undeterred by the declared policy of the government on divestment in PSUs, the Confederation of Indian Industry on Tuesday suggested all assets in the public sector should be privatised.

"Divestment will not and cannot stop," Sunil K Munjal, new President of CII, said.

Asked about the ruling UPA's policy against privatisation of profit-making PSUs in the normal course, he said neither the Common Minimum Programme nor the government has said it would stop divestment.

The government has also talked about divestment of 49 per cent in profit-making PSUs, he added.

However, the CII believes government should be out of business and "there should be privatisation of all the assets in the public sector."

He said the direction of divestment and privatisation had altered with the change of government at the Centre.

Munjal said the purpose of Divestment was to optimise utilisation of resources and to release investible funds for other areas like social development and infrastructure sector.

He said the new government had kept its options open for privatisation of loss-making PSUs and there could be many private corporates interested in these assets, which could be turned around by imparting greater degree of efficiency.

Along with the implementation of VAT, another important area was introduction of incentives for capacity building for corporates, Munjal said.

"We need to incentivise investment for capacity building as more and more companies need to scale up their capacity, otherwise they will not be able to meet increasing demand," he said.

CII also called for abolition of tax on dividend. Asked whether the apex industry chamber favoured any kind of cess or was CII looking forward to it in the upcoming Budget, Munjal said cess was good as long as it would be used for the specific purpose it had been levied.

Giving the example of the highway project, he said the cess on petro products for the development of highway projects was a model which needed to be emulated in other areas.

On UPA government's proposed cess on all central taxes for providing resources for universal quality basic education, he said the move was right step in the right direction.

With Prime Minister Manmohan Singh at the helm and P Chidambaram as finance minister, the industry anticipated a 'reform-oriented and forward-looking Budget,' Munjal said.