Development financial institutions have offered to underwrite the forthcoming disinvestment offers of public sector undertakings like Indian Oil Corporation and Container Corporation of India
The issue was discussed yesterday at separate meetings between finance secretary Vijay Kelkar and G P Gupta, chairman, Industrial Development Bank of India and Lalitha Gupte of Industrial Credit and Investment Corporation of India.
"These PSUs are sound investment opportunities. We have said we are prepared to underwrite the disinvestment," Gupta told Business Standard.
The FIs are persuading the government to drop the idea of setting up a special purpose vehicle to manage the disinvestment programme. They have offered to not only underwrite the issues but also pick up substantial stakes in the PSUs offered for divestment.
The government has been facing stiff resistance from different quarters since finance secretary Vijay Kelkar mooted the idea of using the SPV route for divestment. The government has been unable to meet the deadline of September-end to begin roadshows.
The controversy involving Unit Trust of India and the crash of the stockmarket on October 5-7 has further weakened the government's position on the issue of disinvestment. It is now being felt that book-building through the SPV route may prove to be a frustrating experience in the light of the current market conditions and underwriters would be required to support the process.
The Disinvestment Commission and the PSUs themselves had opposed the use of the SPV route because it would take the profitable navratnas out of the public sector ambit. This also goes against the grain of the the Commission's recommendation that the loss-making units should be taken out first.
"These loss-making PSUs are a big burden on the exchequer, and should be the first to be taken out of the public sector," he said. "The navratnas are the few profit centres for the government. These blue-chips sectors should remain in the government sector for now," he added.
The SPV proposal mooted by finance secretary suggests bringing down government's holding to 49 per cent in HPCL, IBP, IPCL, BPCL, MTNL and IDBI.
Disinvestment Commission chairman G.V.Ramkrishna had also critisised the SPV proposal, saying , "The pricing would be done in a non-transparent manner because there would be no book-building or competitive bidding as recommended by the Commission," he had said and added "We are then going back to the ad-hoc disinvestment regime of the early nineties."
"The government should either sell big block of shares as in strategic sales so that private investors would have management control, or it should let it remain in the public sector so that certain checks can be there.", he has said after the finance secretary made the SPV proposal.
