 "Freight Corridor Corp to award Rs 14,000-cr contracts in FY17")
The railways ministry, led by Suresh Prabhu, is planning to set up a holding company for all central public sector units (PSUs) under its charge.
The chairman of the Railway Board would serve as the chairman and managing director. The only railway PSU that may not come under it is the Indian Railway Finance Corporation, since it is a financial company that raises funds.
The idea behind such a move is to ensure that the holding firm retains proceeds from disinvestment in Railway PSUs and use them for development work. Officials said the Railways have circulated a draft Cabinet note that details the new structure. “The Cabinet note was floated in early August. Once other ministries agree, it will require clearance from the Railway Board,” said an official.
According to the plan, the government will pass on its equity in these companies to the holding company. The structure will be similar to Coal India that functions under the administrative control of ministry of coal and has nine fully-owned subsidiaries.
The 13 railway PSUs that will be a part of this are Container Corporation of India, Ircon International, Indian Railway Catering and Tourism Corporation, Konkan Railway Corporation, Mumbai Railway Vikas Corporation, Rail Vikas Nigam, Railtel Corporation of India, RITES, Dedicated Freight Corridor Corporation of India, Burn Standard Company, Braithwaite & Company, Bharat Wagon & Engineering Company and Kolkata Metro Rail Corporation.
However, the government equity in Indian Railways Finance Corporation (IRFC) will not be transferred to the holding company.
“IRFC is a non-banking financial corporation through which the railway raises loans from the markets. It has a good rating and we don’t want to mess with its ratings by making it a part of this exercise,” the official clarified.
According the plan, there will be a holding company and the 13 PSUs will be its subsidiaries. There will also be a third layer of companies, which will include those that are currently subsidiaries of railway PSUs.
Railways and defence have traditionally been the two ministries most reluctant to divest stake in companies under their charge.
Concor is the only listed railway PSUs. Since Concor is listed, the Railways will have to inform the markets once the holding company structure is finalised.
Experts said divesting stake in unlisted public sector behemoths such as IRCTC, IRCON and RITES would unlock huge potential and be a much-needed source of revenue generation for the government, which fails to meet its disinvestment targets year after year.
Officials in some sections of the central government are miffed with the railway ministry’s proposal.
“These railway PSUs are under the ministry’s jurisdiction. They don’t belong to the railways; they belong to the President of India. The government should get the proceeds and not just one ministry,” said an official, who did not wish to be named. The person added this could create issues with other government departments and ministries.
The government had created National Investment Fund (NIF) for vesting in it disinvestment proceeds. These were to be used for certain defined purposed including infrastructure creation. However, in practice, the government uses sell-off proceeds to meet a part of its yearly fiscal deficit targets. If the new company is created, money will flow to the government only if it disinvests in the holding company. If it divests in the subsidiaries, proceeds go to the parent holding company.
“The advantages of this proposal are that there will be a single decision-making management in future. We can even go for an IPO of this holding company in the future, if necessary,” another official in the know added.
The budgeted disinvestment target for 2016-17 is Rs 56,500 crore, out of which Rs 36,000 crore is expected to come in from minority stake sale in central public sector enterprises through the stock exchanges, while Rs 20,500 crore is expected to come from strategic sales in loss-making or profit making CPSEs or their assets like factories, warehouses, office buildings, and other.
CORPORATISATION ON TRACK
The Railways is planning to create a holding company for its 13 PSUs
Chosen companies
The chairman of the Railway Board would serve as the chairman and managing director. The only railway PSU that may not come under it is the Indian Railway Finance Corporation, since it is a financial company that raises funds.
The idea behind such a move is to ensure that the holding firm retains proceeds from disinvestment in Railway PSUs and use them for development work. Officials said the Railways have circulated a draft Cabinet note that details the new structure. “The Cabinet note was floated in early August. Once other ministries agree, it will require clearance from the Railway Board,” said an official.
According to the plan, the government will pass on its equity in these companies to the holding company. The structure will be similar to Coal India that functions under the administrative control of ministry of coal and has nine fully-owned subsidiaries.
The 13 railway PSUs that will be a part of this are Container Corporation of India, Ircon International, Indian Railway Catering and Tourism Corporation, Konkan Railway Corporation, Mumbai Railway Vikas Corporation, Rail Vikas Nigam, Railtel Corporation of India, RITES, Dedicated Freight Corridor Corporation of India, Burn Standard Company, Braithwaite & Company, Bharat Wagon & Engineering Company and Kolkata Metro Rail Corporation.
However, the government equity in Indian Railways Finance Corporation (IRFC) will not be transferred to the holding company.
“IRFC is a non-banking financial corporation through which the railway raises loans from the markets. It has a good rating and we don’t want to mess with its ratings by making it a part of this exercise,” the official clarified.
According the plan, there will be a holding company and the 13 PSUs will be its subsidiaries. There will also be a third layer of companies, which will include those that are currently subsidiaries of railway PSUs.
Railways and defence have traditionally been the two ministries most reluctant to divest stake in companies under their charge.
Concor is the only listed railway PSUs. Since Concor is listed, the Railways will have to inform the markets once the holding company structure is finalised.
Experts said divesting stake in unlisted public sector behemoths such as IRCTC, IRCON and RITES would unlock huge potential and be a much-needed source of revenue generation for the government, which fails to meet its disinvestment targets year after year.
Officials in some sections of the central government are miffed with the railway ministry’s proposal.
“These railway PSUs are under the ministry’s jurisdiction. They don’t belong to the railways; they belong to the President of India. The government should get the proceeds and not just one ministry,” said an official, who did not wish to be named. The person added this could create issues with other government departments and ministries.
The government had created National Investment Fund (NIF) for vesting in it disinvestment proceeds. These were to be used for certain defined purposed including infrastructure creation. However, in practice, the government uses sell-off proceeds to meet a part of its yearly fiscal deficit targets. If the new company is created, money will flow to the government only if it disinvests in the holding company. If it divests in the subsidiaries, proceeds go to the parent holding company.
“The advantages of this proposal are that there will be a single decision-making management in future. We can even go for an IPO of this holding company in the future, if necessary,” another official in the know added.
The budgeted disinvestment target for 2016-17 is Rs 56,500 crore, out of which Rs 36,000 crore is expected to come in from minority stake sale in central public sector enterprises through the stock exchanges, while Rs 20,500 crore is expected to come from strategic sales in loss-making or profit making CPSEs or their assets like factories, warehouses, office buildings, and other.
CORPORATISATION ON TRACK
The Railways is planning to create a holding company for its 13 PSUs
Chosen companies
- Container Corporation of India, Ircon International, Indian Railway Catering and Tourism Corporation, Konkan Railway Corporation, Mumbai Railway Vikas Corporation, Rail Vikas Nigam, Railtel Corporation of India, RITES, Dedicated Freight Corridor Corporation of India, Burn Standard Company, Braithwaite & Company, Bharat Wagon & Engineering Company and Kolkata Metro Rail Corporation
- Indian Railway Finance Corporation — it’s a non-banking financial company
- To use the proceeds from divestment in these companies for railway projects
- Some officials criticise the move, saying proceeds should go to the exchequer, not only the railways
