In order to achieve Rs 40,000 crore disinvestment target in the current fiscal, the finance ministry has asked cash-rich public sector entities (PSE) such as Coal India, ONGC and Oil India to consider buying government equity in other state-run firms. The ministry has written to all cash-rich PSUs to give detail about their cash balance and capex plans and has informed them if they do not have sufficient capex plans then they should buyback government share or pay higher dividend.
India’s 17 major public sector entities including Coal India (CIL), ONGC, NMDC and OIL has over Rs 1.62 lakh crore in cash reserves during 2012-13. Among these PSEs, CIL had the maximum cash and bank balance at Rs 43,776 crore, followed by ONGC (Rs 22,450 crore), NMDC (Rs 17,230 crore) and NTPC (Rs 16,185 crore).
Among these public sector units, CIL, Indian Oil and SAIL, are in the government radar for disinvestment. The government is planning to raise about Rs 17,000 crore through the stake sale and CIL is the biggest disinvestment proposal for the government in 2013-14 fiscal. Further, the proposed stake sale of the PSEs will split into Offer for Sale (OFS) and buyback and is expected that buyback be done post OFS as share buyback usually happens at a premium.
Under the buyback mode, the government can raise money by selling its equity in the company to the PSE itself. In last year, the government had included buyback of shares mode to prune its stake in state-run firms, however, no funds have been raised through the route so far.
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