Cabinet clears 10% Bhel divestment

UPA govt's reform agenda gains momentum, left sulks.

The Cabinet Committee on Economic Affairs today approved the sale of 10 per cent stake in Bharat Heavy Electricals Ltd (Bhel) through a public offer.

It also decided to go ahead with a stock split for the public sector company's shares with a face value of Rs 10 each to make it more affordable for retail investors.

The details of the stock split will be finalised by the departments of disinvestment and heavy industry. A portion of the shares to be disinvested is proposed to be reserved for the company's employees.

Based on today's closing price of around Rs 910 on the stock exchanges, the government can raise around Rs 2,200 crore from Bhel.

At present, the government holds 67.72 per cent equity in Bhel with the remaining 32.29 per cent held by public banks and foreign institutional investors (22.74 per cent).

The proceeds from the sale will be transferred to the National Ivestment Fund, with 25 per cent of the income of the fund, to be managed by professional fund managers, to be used for revitalising the public sector, and the rest going to meet the Centre's social sector spending.

Finance Minister P Chidambaram told reporters that the Left parties, which had earlier opposed the proposal, had been consulted on the issue. But the Left contested this claim. "There was no consultation," said Communist Party of India leader D Raja.

Communist Party of India (Marxist) leader and Rajya Sabha member Dipankar Mukherjee said, in a note submitted to the finance minister before the Budget, the Left parties had clearly stated they were against any further disinvestment in Bhel.

"The finance minister has it in writing from us that we are opposed to disinvestment in Bhel," he said.