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PM to head new ministerial panel on divestment; buyback plan may rake in Rs 80 billion

The government today announced that it would constitute a Cabinet committee under the chairmanship of Prime Minister Atal Bihari Vajpayee on disinvestment and decided to sell its equity in six public sector undertakings through buyback or sale of shares to another public sector company directly.

The sale of government shares will help in achieving the targets of raising Rs 50 billion through disinvestment in the current financial year, an official spokesperson said after the Cabinet meeting in New Delhi today.

The newly constituted Cabinet committee will replace the existing group of ministers which will have finance minister, industry minister and administrative ministry of the concerned PSUs minister as members.

The spokesperson said price of sale of shares of six companies, which will be sold in the next two months, would be decided by the finance minister, industry minister and the minister for administrative ministry on the recommendation of the core group of secretaries on disinvestment.

The companies' managements have the option to reduce government holding either through buyback or sale to another public sector company directly.

While opting for buyback route, the equity capital of the company would decline. In the other case, the equity of the PSU will remain same. At the same time, the holding of a purchasing PSU will increase to the extent it buys shares in the company, which is offering its equity.

As per today's Cabinet decision, the government has allowed the sale in case of ONGC (upto 12.5 per cent), Indian Oil Corporation and Gas Authority of India Limited (both upto ten per cent. Sale upto five per cent of the government equity in Mahanagar Telephone Nigam Limited and Videsh Sanchar Nigam Limited has been allowed either through buyback or sale to another PSU.

The Cabinet has also approved the sale in part of government equity in National Aluminium Company Limited or NALCO through buyback or sale to another PSU.

Official sources said the government is expected to mop up more than Rs 80 billion at the current price level, if it sells the entire quantity of shares as approved by the Cabinet today. This amount will be much higher than the target fixed for the current year, the sources pointed out.

The government sale in all six PSUs are expected to be more in The nature of book adjustment than actual sale in the stock market.

The move will not affect the stock market much, the sources said. In fact, it may prop up capital market sentiments, if the companies decided to buyback their shares.

So far, the Central government has sold PSU shares only worth Rs 2.25 billion as against the target of Rs 50 billion.

UNI

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