UPA unveils new disinvestment policy

Our Economy Bureau
28 January 2005

New Delhi: The Congress-led UPA government on yesterday unveiled its new disinvestment policy. It involves selling minority stakes in both listed and unlisted profitable public sector units (PSU) but retaining 51 per cent equity to avoid ceding management control.

The cabinet committee on economic affairs (CCEA) has agreed to set up a National Investment Fund (NIF) with proceeds from the sale of government equity in profitable PSUs. This will be in the form of a separate dedicated fund such as the ''central road fund'' outside the purview of the ''consolidated fund of India''.

For implementing the disinvestment programme, the CCEA has segregated profitable PSUs that are currently unlisted and those that are already listed on the bourses.

In the case of profitable PSUs having a net worth of over Rs200 crore that are currently unlisted, the disinvestment of equity would be done through a stock exchange listing by floating an IPO, either independently by the government or in conjunction with a fresh equity issue by the PSU concerned.

For profitable PSUs that are already listed, the minority stake sale will be carried out either in conjunction with a public issue of fresh equity by the PSU concerned or independently by the government through an offer for sale.

"In both these cases, the stake sales will be subject to the government retaining management control of the PSU concerned by holding a residual equity of at least 51 per cent in these entities," a statement issued after the CCEA meeting said.