CCEA clears 10% Neyveli, Nalco divestment

The UPA government today cleared the disinvestment of a minority stake in 2 profit-making non-navratna companies - National Aluminium Company (Nalco) and Neyveli Lignite Corporation (NLC).

The Cabinet Committee on Economic Affairs (CCEA) gave its go ahead for the sale of a 10% stake each in the 2 companies through a book building process. The UPA government had earlier cleared minority stake sales in National Thermal Power Corporation, Power Finance Corporation and National Mineral Development Corporation.

No time-frame has been fixed to off-load the government stake in the 2 public sector companies. "The sell-off process will depend on the prevailing price and the advice of the lead managers. The government will choose the appropriate time. We will not rush it," Finance Minister P Chidambaram said.

Government's holding in NLC would reduce to 83.56% after the 10% stake sale, while its holding in Nalco would come down to 77.15%. Nalco's disinvestment proposal also contains a clause to split the share face value before the offer for sale. The exact split ratio will be finalised by the department of isinvestment in consultation with the ministry of mines, department of expenditure and the department of heavy enterprises.

Asked if the Left parties had been consulted on the decision, Chidambaram said the government was sticking to the decision taken at its meeting with the Left parties on November 21, 2005 where it was decided that only small portion of the government equity would be sold in profit-making non-navratna enterprises in order to raise resources for the National Investment Fund.

The proceeds of the minority stake sale in both PSUs would go to the Fund. Up to 75% of the returns on the investments made by the Fund would be used to fund the social sector while the remaining 25% would be used to revive other PSUs, Chidambaram said.

The minister said even after the stake sale, the 2 companies would remain public sector units with government holding being in excess of 76% in each.

With regard to Nalco it was also decided that the department of disinvestment would be authorised to take a decision on the issue of bonus shares in consultation with the ministry of mines, department of expenditure and the department of public enterprises.