The finance ministry has to deal with more obstacles than just poor market conditions to meet its target of collecting R40,000 crore through disinvestment in the current fiscal. The railway ministry has not yet responded to the department of disinvestment?s (DoD) proposal in June this year for stake sales in profit-making PSUs under the former?s administrative control. These companies are Rites, Ircon International (Ircon) and Container Corporation of India (Concor).
According to government sources, the proposal is hanging fire due to strong reservations from Trinamool Congress supremo and West Bengal chief minister Mamata Banerjee. Sources also cite objections raised by trade unions of these companies as another reason for the delay. This is in contrast to the defence ministry which has given in-principle approval for 10% disinvestment offer in state-owned Hindustan Aeronautics Ltd.
When contacted, railway minister Dinesh Trivedi told FE, ?The (DoD) proposal has not reached me.? Other railways officials, however, remained evasive saying that the matter was ?under consideration? and they could only comment when a decision was taken.
A senior official from Concor, who wished not to be named, said the company needs funds for expansion but railway ministry has to take a final call on the disinvestment proposal. The finance ministry wants disinvestment of 5% in Concor, which will reduce government holding from 63% to 58%. An official from Rites told FE, ?Initial public offer (IPO) proposal of Rites is pending since 2008 as the parent ministry is against disinvestment?.
Rites IPO, releasing 28% in public domain, was approved by cabinet committee on economic affairs in 2008 but was later delayed citing poor market conditions in the backdrop of global financial crisis. The government was supposed to offload 10% in Ircon in the same year but no action was taken. The government holds 99% stake in Ircon and 100% in Rites. Concor is 63.09% government owned.
The finance ministry is already facing a dilemma on divesting in more firms as markets are not performing well. Last week, the government had to defer follow-on public offer of state oil and gas explorer ONGC due to unfavorable market conditions. The public offer, which was expected to fetch R12,000 crore, was to open on September 20 earlier.
The government has already approved disinvestment in ONGC, SAIL, Hindustan Copper, National Building and Construction Corporation and Bharat Heavy Electricals Ltd. However, volatile stock markets have forced it to delay the formal process of selling stake in these PSUs, even as almost six months of the current fiscal are over.
So far in the current fiscal, the government has been able to mop up just Rs 1,100 crore by offloading stake in Power Finance Corporation, a small sum step towards achieving the overall target of garnering R40,000 crore by March 31, 2012. Last fiscal, the government had raised Rs 22,763 crore from sale of equity in public sector enterprises, as against a target of R40,000 crore.