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Divestment process meandering towards trust, says panel chief

Rediff Business Bureau

Disinvestment Commission chairman G V Ramakrishna has disclosed that the government has indicated that it will go by the panel's suggestion to transfer public sector undertakings' shares to a National Shareholding Trust rather than the proposed Special Purpose Vehicle.

Ramakrishna said the methodology for setting up of the trust is important to firm up a proper strategy for the sale.

Addressing the Punjab, Haryana, Delhi Chamber of Commerce and Industry in New Delhi on Wednesday, he said his meeting with Finance Secretary Vijay Kelkar resulted in the latter agreeing to forward the trust proposal to the government.

Kelkar, who mooted the idea of floating a SPV, was asked in September by a group of secretaries to obtain views of the Disinvestment Commission. Ramakrishna objected to the proposal and himself mooted the idea of setting up a divestment trust.

Intially, the proposed trust could transfer 15-20 per cent shares of blue-chip state-run units with less than 70 per cent government holding to financial institutions and banks at a discounted price, he said.

They could offload their stake in the Indian market within six months to one year and share the profits with the trust, which, in turn, will be transferred back to the government, he said.

Later, the remaining holding ought to be divested to the institutions at market prices while retaining 26 per cent with them, he said. The trust and the institutions will need to work out a profit-sharing agreement on the subsequent sale of shares.

The loss-making outfits should be shut and the workforce suitably compensated, while there should be no disinvestment in strategic units with 100 per cent government ownership, he said.

The trust should be incorporated under the Section 25 of the Companies Act, 1956. Its board could comprise chairmen of Industrial Development Bank of India, State Bank of India and Life Insurance Corporation, besides Disinvestment Commission chairman, eminent management experts, finance secretaries and state-run units' chief executive officers, he said.

A speedy disinvestment would increase enterprise value and maximise receipts to government, besides boosting the capital market, he said.

He also opined that foreign merchant bankers should be involved only for global depository receipts. He also criticised the Securities and Exchange Board of India's share buyback guidelines saying promoters and their acquaintances would be able to fix prices under the existing regulations.

The guidelines provide for prices to be fixed at a shareholders' meeting only; there is no way retail investors from across India can attend the meetings. So prices could be fixed in-house, he observed.

The SEBI could have made postal-ballot system compulsory, making investors cast their opinion by post, thus safeguarding the buyback price.

EARLIER STORY:
PSU privatisation only way out, says G V Ramakrishna

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