Govt mulls options other than divestment to raise `40,000 cr1 min read . Updated: 04 Dec 2013, 12:26 AM IST
Share buybacks by firms and dividend payments can raise targeted `40,000 crore by March 2014
New Delhi: Instead of divesting stake in state-owned companies, the government may look at other options, including share buybacks by the firms and dividend payments to the government.
India initially wanted to raise ₹ 40,000 crore in the year to March 2014 by selling shares of government-run firms but has only managed to garner ₹ 1,325 crore. It had also decided to dilute stake in state-run Coal India Ltd and Bharat Heavy Electricals Ltd (Bhel) and sell some of its residual stake in Hindustan Zinc Ltd and Bharat Aluminium Co. Ltd, both controlled by London-based Vedanta Resources Plc.
“Bhel and Coal India have been asked to come back with various options," finance minister P. Chidambaram said in a media briefing after a meeting that was attended by Prime Minister Manmohan Singh, coal minister Sriprakash Jaiswal, heavy industries and public enterprise minister Praful Patel, mines minister Dinshaw J. Patel and law minister Kapil Sibal. The government will raise its stated target, Chidambaram said. “The money has to be raised through these (asset sales, share buyback and dividend payments) options. The ministry of heavy industries and coal ministry will work out the best option for raising proceeds as alternative to disinvestment," the finance minister said.
The stake sale of Coal India has been hanging fire for long on account of opposition from trade unions. The government had originally planned to divest 10% in Coal India, but on account of stiff opposition from workers, it lowered it to 5%. At the current market price of ₹ 270.75, the sale could fetch around ₹ 8,500 crore. The government holds 90% in the miner.
Bhel’s disinvestment is also facing roadblocks of unfavourable market conditions as the company’s share price has taken a beating since its disvestment was approved in 2011. Besides, by selling 5% stake in Bhel at the current market price of ₹ 163.35, the exchequer could earn more than ₹ 1,300 crore.
“Disinvestment is the best option," said Dharmakirti Joshi, chief economist at ratings agency Crisil Ltd. While the end-game is reducing the fiscal deficit and there are various ways to curtail it, the other options may not fetch enough cash, Joshi said.
PTI contributed to the story.