Divestment to gain steam from April

30 companies in queue for Cabinet nod in Jan

The disinvestment programme is set to enter an ambitious phase in the next financial year with the Department of Disinvestment planning to seek Cabinet approval for a host of companies from January.

The Cabinet has so far followed a cautious approach in approving disinvestment in companies, though it has simultaneously come out with a broad policy direction for the programme.

Based on the policy, the disinvestment department has prepared a list of up to 30 companies that can be considered for disinvestment. Earlier it had written to the administrative ministries of 60 central public sector undertakings to suggest the names that could be added or removed from the list and the appropriate timing and size of public issues of such entities.
 

LIKELY:SAIL, MMTC, Coal India, Manganese Ore India Ltd

UNLIKELY: PSUs in West Bengal, Tamil Nadu 

NOT INCLUDED: Railway PSUs Rites Ltd, Ircon; banking & insurance companies and strategic companies like Nuclear Power Corp Ltd

“We have asked various ministries to identify the companies where a public issue can bring in resources to the government, or to the company itself if it requires funds. Some companies like SAIL, MMTC, Coal India Ltd and Manganese Ore India Ltd (MOIL) have shown interest, but their public issues are not likely to happen this financial year,” an official in the finance ministry told Business Standard.

NTPC, Satluj Jal Vidyut Nigam Ltd, Rural Electrification Corporation and NMDC are already on their way to the capital markets. The government estimates that 5 per cent divestment of its equity in NTPC alone will fetch Rs 8,100 crore. It is planning to complete the disinvestment process in these companies by March 2010. According to the amended rules of National Investment Fund, disinvestment proceeds flowing into the fund will be used for capital expenditure on social sector programmes till March 2012.

Disinvestment in more PSUs can happen only when all approvals, including the Cabinet nod, are in place, which may take three-four months. One of the first ones to get Cabinet approval will be SAIL, which will go public in two phases to raise 10 per cent equity each time. Half of this would be sale of government equity and the remaining to raise fresh equity.

In the case of MOIL, which was converted into a 100 per cent government company in 1977, disinvestment would be delayed as there was clause in its memorandum under which its shares could not be sold through public offer, the official said.

The government came out with a disinvestment policy last month, under which PSUs earning net profit for the last three years would be listed and all profitable, listed PSUs not meeting the mandatory public shareholding of 10 per cent would be made compliant. There are 10 listed PSUs where public holding is less than 10 per cent and 50 unlisted state-run firms, which are profitable.

The official said half of those companies cannot be considered for disinvestment for various technical and political reasons, thus, bringing down the list of eligible entities to less than 30. According to another official, the government is unlikely to divest stake in PSUs in West Bengal and Tamil Nadu due to opposition by Trinamool Congress and DMK. Besides, Railway PSUs like Rites Ltd and Ircon have not been included since Trinamool leader and Railway Minister Mamata Banerjee is not in favour of disinvestment.

Banking and insurance have been kept out of the disinvestment drive as they are set up under separate Acts. Any divestment will require an amendment in those Acts. In the case of strategic companies, like Nuclear Power Corporation Ltd, though there was no Cabinet caveat against offloading of shares in them, officials said the government did not want to invite opposition by divesting in them.