Query over Neyveli Lig 'divestment'

The disinvestment department has written to the coal ministry seeking details about the proposed divestment of government equity in Neyveli Lignite Corporation Ltd, an official said today.

"We (disinvestment department) have written to the coal ministry asking for details about any proposed disinvestment of government equity in profit-making public sector units under its control," the disinvestment department official said.

The letter has sought specific details on whether the coal ministry proposes to dilute government stake in Neyveli Lignite through a public issue.

It also said the government may decide to sell part of its stake in the company in case the public sector unit had plans to raise equity capital to fund its projects. This is in line with the procedure adopted in the case of National Thermal Power Corporation Ltd.

The letter forms part of an earlier proposal by the finance ministry to sell minority stakes in profit-making public enterprises, both listed and unlisted, without ceding management control.

News of progress on the proposal to divest stakes made Neyveli Lignite's shares jump on the National Stock Exchange. At 1323 IST, its shares traded at Rs 75.80, up nearly 3.5 per cent over Monday.

The proceeds raised from the disinvestment would be parked in the National Investment Fund.

Returns generated on this corpus would be used to finance social sector projects and investment requirements of profitable public sector units.

However, the department has not given any indication about the extent of equity dilution being contemplated. Currently, government holds 94 per cent stake in the south India-based company.

The government has been contemplating the public offer route to raise resources after it abandoned the strategic sale option following pressure from the Left parties "" allies of the government.

An earlier attempt at shedding government stake in Neyveli through the strategic sale route had to be aborted in 2002 due to varying interpretations of the provisions of the Coal Mines Nationalisation Act.

The coal ministry had asked the law ministry to examine whether lignite is covered by the Act under which privatisation of coal mines is not permitted.

However, despite a favourable opinion from the law department, the government chose not to go ahead with the disinvestment.

Neyveli is an integrated power producer-cum-lignite mining company with a generation capacity of 2,500 megawatts.