Home >Politics >Policy >PSEs to stay PSUs even with below 51% government stake

NEW DELHI: The government is planning a major overhaul of the definition of state-run companies where an entity will continue to qualify as public sector enterprise (PSE) even if the government holding falls below 51%.

Sources in the Department of Public Enterprises said the change in definition is being discussed with the Finance Ministry, and an announcement could be made by the new government.

"There is a thinking that PSU definition should be maintained with government holding of, say, 40% or 26% in case of certain non-strategic entities. This will not only give flexibility to PSU boards in decision-making but also allow more room for the Centre to raise additional revenue from disinvestment," said a top PSE official aware of the proposed changes.

Under the present definition, CPSEs are companies in which the direct holding of the central government or other CPSEs is 51% or more.

It can be brought down to, say, 40% . It will still allow the Centre to be the largest shareholder especially in companies like NTPC, Powergrid, BHEL, where public shareholding is already very high. The changes will also facilitate consolidation among PSUs in different sectors.

For example, the Power Finance Corporation (PFC) that has bought entire government equity in REC, now wants to merge the entity with itself. But this will bring down government shareholding in the merged entity to just about 42-43 per cent, taking the company outside the PSU-fold. If the threshold of the government holding is lowered, such consolidation will be promoted without companies fearing to lose their PSU character.

"This would be wonderful change that will allow PSU boards to be widely represented. The fear of a possible hostile takeover of companies with reduced government equity is also unfounded as the government with 40 per cent will still have substantial stake that can also rise if state/owned institutions, like LIC, also hold a sizeable share," said an industry expert.

The government is already taking steps to reduce its stake in various PSUs. In the case of banks, the aim is to first reduce government shareholding to about 52 per cent, and then further down. In others, this exercise can be pursued rapidly. Market regulator SEBI also wants PSUs to increase public float to at least 25 per cent.

The government has surpassed the FY19 disinvestment target of 80,000 crore by 5,000 crore. It has set a conservative target of 90,000 from disinvestment in FY20.

If the PSU definition is changed, it would be easier for the government to mobilise funds even in a choppy market as PSUs could be asked to buy back government shares. If markets are good, higher number of government shares in PSUs can be offered at a premium.

This story has been published from a wire agency feed without modifications to the text.

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