New Delhi: After a two-year hiatus, the government has revived the controversial issue of sale of government equity in public sector undertakings.
The Union cabinet has given the go-ahead to sell 10% of its holdings in the Rural Electrical Corporation (REC), and 5% each in the Power Grid Corporation Ltd (PGCIL) and National Hydroelectric Power Corporation (NHPC) Ltd. This is expected to net the government Rs1,500 crore.
The government’s stake sale will piggyback on fresh equity offerings of up to 10% each in all the three companies through a public offer in the first quarter ended June of 2008 fiscal. The combined impact notwithstanding, the shareholding of the government, will still average 80% plus in each of the companies.
Explaining the rationale to sell at the current juncture, finance minister P. Chidamabaram said it was essentially designed to partially compensate the government, even as its holdings got diluted with the companies going ahead with their own initial public offerings (IPO). Chidambaram said, “this is a selective case, since the power companies were coming out with their IPOs.”
The IPOs will net Rs420 crore to REC, Rs971 crore to PGCIL and Rs1,490 crore to NHPC.
While Chidambaram said the Left parties had been consulted on the issue, Communist Party of India leader D. Raja said they were still opposed to the decision. “We were told about it, but that doesn’t mean we agree with the decision. We are opposed to any dilution of government equity in public sector units,” Raja said.
Chidambaram said that the proceeds of the stake sale would be parked as a corpus in the National Investment Fund (NIF). “The proceeds from the stake sale will not be used for revenue or capital expenditure. As decided, bulk of the NIF will be used for social sector projects and for reviving public sector enterprises,” he said, adding that since it was set up, no money has flowed into the fund.
The cabinet also approved a proposal to allow Bharat Earth Movers Ltd (BEML) to raise funds through a public offer. The government holding in the company of 61.23% will come down to 54% after the IPO. BEML will issue 49 lakh shares of Rs10 each at a price band to be decided by the board of directors.
The cabinet also agreed to accede to the Madrid Protocol, 1989 administered by the World Intellectual Property Organization. This will faciliate speedy registration of Indian trade marks, making it the 72 country to do so.
In other decisions, the cabinet also cleared Rs442 crore for the first phase of computerization of district and subordinate courts across the country. It also decided to pump in Rs108.4 crore to revive Mecon Ltd and approved a new productivity linked reward scheme, which will benefit nearly 66,000 port and dock employees. The benefit will run from 2002-03 to 2009-10. The cabinet also approved Rs2,169 crore to Nafed for meeting losses on account of procuring mustard at minimum support price. A national design policy was also cleared, the action plan for which will be out in three months.
Ashish Sharma contributed to this story.