Proposal an outcome of limitations of National Financial Holdings Company Ltd
Plans to sell government-held shares in ITC, Axis Bank and L&T have got fast tracked in a fiscally challenged year. The sale could provide the finance ministry just short of Rs 50,000 crore.
But as time is short, the government plans to revive the defunct SUUTI (Specified Undertakings of Unit Trust of India) to do the sales by withdrawing a Cabinet decision to shut the organisation.
The finance ministry has proposed that the Cabinet should rescind its March 2012 decision to wind up SUUTI.
This is critical since only this entity had the right to dispose off the shares by timing the market instead of having to seek a Cabinet approval each time.
“Approval is sought to defer the implementation of the decision of the Cabinet dated 23 March 2013 to wind up SUUTI and transfer of its assets and liabilities to a new company such that SUUTI can continue to sell its strategic assets with the prior approval of the Government as was the practice earlier,” says the draft Cabinet note of November 18.
The Cabinet had in March 2012 approved the proposal to shut SUUTI and a new company National Financial Holdings Company Ltd (NFHCL) was registered in June 2012 under the Companies Act.
It was then decided to transfer all assets and liabilities to NFHCL, but the present review is an outcome of NFHCL limitations because of its character under the Companies Act.
The ministry’s main concern is that while NFHCL cannot dispose off any strategic assets without the approval of the Cabinet, SUUTI is empowered to sell them with the advice of board of advisers.
“Seeking Cabinet approval for divesting its strategic assets, which are liquid financial instruments will affect the optimal and effective utilisation of these assets by delaying time critical decisions,” argues the note.
It will also save transaction and tax related costs amounting to around Rs 200 crore if the transfer of assets is not done, it says. The proposal to defer the earlier Cabinet decision comes as the better of the other alternative of disinvesting in public sector undertakings, which