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Our Economic Bureau
New Delhi, Sept 4: The core group of secretaries has endorsed the finance ministry's proposal to set up a special-purpose vehicle (SPV) for putting the privatisation process of public sector undertakings (PSUs) on a fast track.
The group which met under the chairmanship of cabinet secretary Prabhat Kumar on Friday, will, however, discuss the SPV proposal aiming to reduce government stake to 49 per cent in the ten navratnas, six top public sector banks and the IDBI which together hold a little over 50 per cent of the country's GDP in assets, further at its meeting next week prior to forwarding it for cabinet approval, official sources said.
The disinvestment process is slated to begin by the end of the month with the Concor issue. The group, however, felt that preparations were not adequate for divesting the Gas Authority of India Ltd's (Gail) shares and hence deferred its decision for the time being. On Indian Oil Corporation, the core group decided on 10 per cent disinvestment around mid-November.Details of the domestic and GDR issue modalities will be decided later.
The issue pertaining to disinvestment of the Videsh Sanchar Nigam Ltd's (VSNL) shares, according to telecom ministry sources, was not taken up at Friday's meeting.
The government, as per the 1998 budget, proposes to raise Rs 5,000 crore during the current year via disinvestment of shares of the four public sector companies -- IOC, Concor, VSNL and Gail.
As an overall strategy to put the privatisation process on a fast track and pursue the Disinvestment Commission's recommendations to a logical end, the crore group discussed the SPV issue in great detail. It has also decided to seek approval of the administrative ministries for reducing the government holding in companies like FACT and NFL to below 49 per cent.
Apart from expediting the disinvestment programme, the SPV scheme's objective, highly placed finance ministry sources said, is to establish a transparent mechanism for imparting autonomy to public sector enterprises withreference to their financial, operational and commercial decision making process.
The proposal envisages that government stake in select public sector companies like IBP, HPCL, BPCL, MTNL, IPCL and IDBI be reduced to 49 per cent by transferring equity to a SPV with 49 per cent government equity.
This, it was pointed out, will ensure that the SPV was not a government company under section 617 of the Companies Act 1956. On the other hand, the SPV's structure will also provide a certain degree of comfort to the government.
As per the proposal, the SPV will be headed by a government nominee as chairman. The company will have four government directors, two public sector nominees and three independent experts as directors. The SPV board, to drive the privatisation programme, will have powers to take decision on issues like pricing, timing and selection of intermediaries.
It was also pointed out that the SPV scheme will benefit the government in several ways. First, it will have an immediate impact on thefiscal deficit on account of fresh inflow of funds to the tune of 51 per cent of the value of the surplus equity holding being transferred to the SPV.
Second, imparting of autonomy to various PSEs will improve their performance and profitability, leading to an increase in value of government's 49 per cent equity holding in these enterprises. Third, the government will be a direct beneficiary to the extent of 79 per cent of any improvement in valuation of privatised public sector undertakings.
The scheme's other big advantage will be that it will prevent distress sale of shares of public sector enterprises under the budgetary time frame.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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