Rich PSUs to bail out divestment by buying stakes of other PSUs

“Under the cross-holding regulations, we can pick up shares of other state-owned companies subject to approval of the Cabinet,” said an official in the steel ministry, under whose purview NMDC comes.

The Cabinet in March last year had allowed cash-rich PSUs to participate in buyback of shares, but the companies remained hesitant.

The government also announced a cross-holding scheme for PSUs and other state-run entities under which the cash-rich ones like LIC and SBI would buy the government’s holding in other public sector companies. This will allow the government to raise money and still maintain an indirect owner.

“There are some companies that have more surplus cash than their annual turnover. So if they do not have any capital expenditure plans, they can invest this amount in some state-owned blue-chip company,” another government official said.