The government plans to resurrect the ministry of disinvestment in a bid to raise resources by selling its shareholding in public sector companies.
Sources said Montek Singh Ahluwalia, former deputy chairman of the Planning Commission, was a front-runner among the names shortlisted to head the new ministry. The new disinvestment minister is likely to hold Cabinet rank.
Originally set up under the BJP-led National Democratic Alliance, the ministry was converted into a department under the finance ministry in 2004 when the United Progressive Alliance (UPA) first came to power.
| THE ‘A’ LIST Listed companies with government holding of more than 90% | |
| Profit-making companies | Govt |
(Travancore)
This was done to meet the demands of the Left parties, which had raised strong objections to disinvestment on the assumption that it leads to job losses. The UPA was dependent on the four Left parties’ 60-odd seats for outside support in the last Lok Sabha.
With the Left no longer in the power equation, the government has decided to focus on selling government shares either through public offers or institutional placements (especially for listed blue-chips).
The department of disinvestment is currently headed by Disinvestment Secretary Rahul Khullar.
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The issue of disinvestment has grown in importance because the government faces a fiscal deficit of 6 per cent of Gross Domestic Product, owing to farm loan waivers, pay increases, a country-wide rural job guarantee scheme and a fiscal stimulus package. The fiscal deficit has overshot a parliamentary fiscal responsibility target by over 3 percentage points, from 2.5 per cent to around 6 per cent.
Senior officials said the government has prepared a list of over 40 companies in which it is planning to divest part of its shareholding through the stock market. The roster includes 15 listed entities in which the government holds more than 90 per cent (see table).
Since divestment will not involve a strategic sale of shares or a change of management, it is unlikely to face resistance from other political parties, sources added.
“In many of these cases, the divestment will take place through secondary market operations, so the government will not need even board approvals,” an official said.
Besides raising resources, he pointed out that the move would also help the government comply with stock exchange listing norms, under which a minimum of 10 per cent public float is stipulated.
The government has also prepared a list of around 25 unlisted companies with a net worth of Rs 200 crore which have earned a net profit in each of the last three years for selective disinvestment.
Some of these are Bharat Sanchar Nigam Ltd, Rashtriya Ispat Nigam, Coal India, Hudco, Export Credit Guarantee Corporation, Indian Railway Finance Corporation and North East Electric Power Corporation Ltd.
The disinvestment process was started for NHPC, Oil India and RITES in 2008 but was called off, mostly owing to poor market conditions.
The government estimates that it could raise over Rs 50,000 crore by selling a small portion of its shares in these companies. This could reduce the fiscal deficit by around one percentage point.