The Union Budget 2005-06 will provide for setting up of a separate fund for revitalisation of public sector companies, highly placed sources said on Thursday.

To start with, the fund size will be small but as and when the need arises more funds will be provided for, sources said.

The fund will be part of the budget of ministry of heavy industry and money will be released for revitalisation of a specific public sector company when its case is cleared by the Board for Reconstruction of Public Enterprises.

"The money from the fund will be provided on merit of each case. Resources will be provided only when a firm case is made that a particular PSU can be revived. No money will flow for testing whether a particular company can be revived," the sources added.

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They said finance ministry has agreed in principle to provide funds for revitalisation of PSUs in 2005-06 budget but instead of committing the funds upfront it has decided to start with a small corpus and provide resources when needed.

For revival of sick PSUs under its control, the ministry alone has drawn up a Rs 3,000 crore (Rs 30 billion) plan.

While Rs 1,500 crore (Rs 15 billion) will be required for writing off liabilities of the sick government-owned companies, the same amount would be used for their upgradation and modernisation.