Govt nod for divestment of 3 power PSUs

CABINET DECIDES

Having convinced the Left parties, the government today approved disinvestment of a small portion of its shareholding in three public sector companies. The proceeds (around Rs 1,500 crore) will be put in the National Investment Fund.

The government also allowed Bharat Earth Movers Ltd to go ahead with a public issue of 7.23 per cent of its equity to fund its modernisation and expansion plan. After the issue, the government's equity will come down to 54 per cent, with the rest being held by institutions and the public.

For the stake sales, cleared today by the Cabinet Committee on Economic Affairs, the government will ride "piggy-back" on the proposed public issues of the Rural Electrification Corporation Ltd, the Power Grid Corporation of India Ltd (PGCIL) and the National Hydro-electric Power Corporation Ltd (NHPC).

The government will offload 10, 5, and 5 per cent stakes, respectively, in these companies. The government also proposes a fresh equity issue of 10 per cent each of the pre-issue capital of these three companies.

The public issues are estimated to fetch Rs 2,881 crore (Rs 420 crore from Rural Electrification Corporation, Rs 971 crore from PGCIL and Rs 1,490 crore from NHPC). The pattern of this disinvestment is identical to the one adopted in the case of thermal power giant NTPC.

After the issue, the government's shareholding in PGCIL and NHPC will come down to 86.36 per cent each while its holding in Rural Electrification Corporation will come down to 81.22 per cent.

The decision to divest stakes in the three companies comes after the United Progressive Alliance government had, last June, gone for 10 per cent disinvestment in National Aluminum Company Ltd and Neyveli Lignite Corporation. The government has also decided to offload its remaining 10.26 per cent equity in car maker Maruti Udyog Ltd, a move expected to raise around Rs 2,000 crore.

Briefing reporters, Finance Minister P Chidambaram said the approvals did not mean a revival of the disinvestment programme.

"This is a standalone case. In order to compensate for the dilution of the stake, the government intends to piggy back on the initial public offer and route the entire amount raised into the National Investment Fund, meant to help social development programmes. It is not for revenue expenditure or current expenditure," he said.

The government had suspended moves to disinvest its shareholding in public sector companies last year, following opposition from the Left parties and other coalition allies. The current move has come after consultations with partners.

Chidambaram added that External Affairs Minister Pranab Mukherjee had met CPI-M leaders in January and told them that "no money was flowing into the National Investment Fund".

The Cabinet Committee on Economic Affairs agreed to deposit Rs 13.71 crore with the Andhra Pradesh government for land acquisition for the Tummalapalle mining and milling project. It also approved Rs 441.8 crore for the first phase of the computerisation of district and subordinate courts.