Government defers decision on PSU divestment

The union cabinet has deferred a decision on the government divesting part stakes in public sector units through the buy-back and other modes, to raise around Rs40,000 crore.

''The buy-back proposal came up for discussion but decision on the proposal has been deferred,'' sources said.

The Department of Disinvestment (DoD) had proposed part sale of government stake to cash-rich PSUs themselves to raise around Rs40,000 crore. The DoD had also identified around 24 public sector enterprises with a total cash balance of Rs200,000 crore or so for the buy-back programme.

The cabinet is reported to have rejected the proposal following opposition from several ministries, including petroleum and coal.

Also, the buy-back programme, if implemented, would have seriously impaired the ability of major PSUs like SAIL and Coal India Ltd to make fresh investments.
PSUs like SAIL, NMDC, ONGC, NTPC, Coal India, Oil India, MMTC, Neyveli Lignite, NHPC, BHEL and GAIL also objected to the buyback proposal as it would have impacted their cash balances.

With the market jittery over falling rupee, the government also thought it prudent not to offload PSU shares in the market now, thereby stymieing plans for divestment.

In fact, market regulator Securities and Exchange Board of India (SEBI) yesterday announced relaxed norms for buyback of shares and dilution of equity by companies, in order to facilitate the government's divestment process.

The board of SEBI yesterday announced new norms for buy-back, allowing companies to close transaction within days against the normal process, which needed months for it.