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  3. Finance Minister zeroes in half a dozen companies for divestment

Finance Minister zeroes in half a dozen companies for divestment

27 Nov 2013 Evaluate

The Finance Ministry has zeroed upon half a dozen companies to liquidate its stake held in these companies, in order to meet the difficult to achieve Rs 40,000 crore divestment target for the current fiscal, which could help contain country’s fiscal deficit target of 4.8% of GDP. So far, the government has only managed Rs 1,323 crore from disinvestment. In order to make this task possible, the finance ministry is also planning to tweak the disinvestment strategy by reviving Specified Undertaking of Unit Trust of India (Suuti) and launching public-sector exchange-traded funds (ETFs).

Suuti, through which the government holds stakes in private companies, like ITC, L&T and Axis Bank, was dismantled after a Cabinet decision in March 2013. Post to this, it was decided that Rs 40,000-crore assets would be transferred to an asset management company (AMC), which would leverage the assets to raise resources for the government. However, now the government wants to revive Suuti in order to do away with Cabinet clearance, each time it sells shares held by proposed AMC if the trust is not revived.

Further, with barely few months left in the fiscal year, the disinvestment department has initiated consultations with stakeholders on the possibility of instruments such as 'exchangeable bonds' to raise funds. However, this is not something new since the Finance minister P Chidambaram in his budget for 2007-08 had allowed these exchangable bonds that allow the issuer to unlock a part of its holdings in group companies without immediate actual dilution. Supposedly, the government issues the bonds to cash-rich Coal India, in return give it shares of, say, Steel Authority of India, which would create a cross holding among public sector companies.

Meanwhile, among the companies likely to be disinvested in this year, the first could be Power Grid Corporation of India (PGCIL) or IOC in December. The public issue for Engineers India (EIL) is scheduled for January, while that for Hindustan Aeronautics is likely to come after that.

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