Govt defers decision on PSU disinvestment through buyback

Amid inter-ministerial differences, the Union Cabinet today deferred a decision on proposal of Disinvestment Department to raise Rs 40,000 crore from divestment of PSUs through buyback and other modes.
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Jan 04, 2012, 08.22 PM | Source: PTI

Govt defers decision on PSU disinvestment through buyback

Amid inter-ministerial differences, the Union Cabinet today deferred a decision on proposal of Disinvestment Department to raise Rs 40,000 crore from divestment of PSUs through buyback and other modes.

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Govt defers decision on PSU disinvestment through buyback

Amid inter-ministerial differences, the Union Cabinet today deferred a decision on proposal of Disinvestment Department to raise Rs 40,000 crore from divestment of PSUs through buyback and other modes.

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Govt defers decision on PSU disinvestment through buyback
Amid inter-ministerial differences, the Union Cabinet today deferred a decision on proposal of Disinvestment Department to raise Rs 40,000 crore from divestment of PSUs through buyback and other modes.

"The buyback proposal came up for discussion but decision on the proposal has been deferred," sources said.

The Department of Disinvestment (DoD), which has identified about two-dozen cash rich public sector enterprises with a total balance of nearly Rs 2 lakh crore, had sought opinion of respective ministries on disinvestment through the buyback mode.

Sources said several ministries, like petroleum and coal, were not in favour of the buyback proposal as the move would have impacted the cash balance of PSUs under them. The companies which have been identified by the government for stake sale include SAIL , NMDC , ONGC , NTPC , Coal India , Oil India , MMTC , Neyveli Lignite , NHPC , BHEL and GAIL .

As the market conditions are not conducive for disinvestment through public offer route, the DoD has been planning to raise funds through other methods like, buyback and cross holding among PSUs.

Under the buyback mode, the government can raise money by selling its equity in the company to the PSU itself. In order to facilitate the disinvestment process, the Sebi Board yesterday, relaxed the norms for buyback of shares and dilution of equity by companies.

 It would help the companies to complete the process of selling shares within days, as against the normal process which can take months. Among other things, the disinvestment department has also suggested promoting cross-holding of equities between CPSEs, which would help the government raise money without diluting its holding in such PSUs.

Also watch the accompanying video for CNBC-TV18's Aakansha Sethi's analysis.

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