To translate the Manmohan Singh administration?s disinvestment policy announced on Thursday into action, the Centre will set up a core group of secretaries to chalk out the procedures to be followed for stake sales in profitable PSUs. More importantly, the department of disinvestment, which has been in a slumber of sorts since the end of the NDA government, will enjoy greater powers vis-?-vis the administrative ministries of PSUs.
As many as 32 central ministries control 220-odd functional PSUs in different sectors. The highest number of PSUs?51?falls under the ministry of heavy industries. Prior to the new policy, the disinvestment department came into the picture only if administrative ministries approached it for stake sales in their PSUs. Now, the disinvestment department will call the shots.
?There will be a core group of secretaries on disinvestment that will take policy decisions on the procedures to be followed. The disinvestment department will identify PSUs that qualify for listing under the policy and work with administrative ministries to prepare them to hit the markets,? a senior government official told FE.
The group of secretaries will include secretary (coordination & public grievances) in the Cabinet secretariat, Ajit Kumar Seth, disinvestment secretary Sunil Mitra and finance secretary Ashok Chawla, among others. Taking an unlisted PSU to the market takes at least six months of paperwork and clearances, which includes appointing merchant bankers, setting valuations and drawing up a draft red herring prospectus.
?Once the disinvestment department and the administrative ministry complete their formalities, the former will submit stake sale proposals to the Cabinet Committee on Economic Affairs for approval. Transaction advisors will be appointed thereafter and the timing of the issues will be approved by the finance ministry,? the official said.
Ironically, the new disinvestment policy does not mark a dramatic departure from its first innings diktat drafted with the Left parties–it simply puts thresholds and criteria where there were none before. UPA-I?s National Common Minimum Programme promised that ?public sector companies and nationalised banks will be encouraged to enter the capital market to raise resources and offer new investment avenues to retail investors?.
But since the decision to list was left to administrative ministries, only a handful of PSUs such as Power Finance Corporation, Power Grid Corporation of India and Rural Electrification Corporation were listed. IPOs of NHPC and OIL were cleared by UPA-I, but only listed in August-September. NTPC was listed during the UPA?s tenure, but the decision to do so was made by the preceding NDA administration.
UPA-II has simply applied the norms of Sebi for listed stocks as well as those seeking to raise capital through equity sales. ?The 10% threshold to be achieved by profitable listed PSUs is according to Sebi?s current norms. The criteria for identifying unlisted profitable PSUs that should be listed ? no accumulated losses, net profits in three preceding years and positive net worth ? is also drawn from Sebi?s listing pre-requisites,? an official said.