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Sale permission
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New Delhi, Oct. 25: The cabinet committee on economic affairs today approved the divestment of a 10 per cent stake in iron ore miner NMDC Ltd, but with a rider — an empowered group of ministers on divestment could cancel the sale if it did not find enough demand at or above the floor price.
The government expects to raise about Rs 30,000 crore from selling stakes in state-run firms this fiscal. However, finance ministry officials feel they will only be able to raise Rs 12,000-13,000 crore by the end of this calendar year.
The government holds about 90 per cent stake in NMDC, which has a paid-up capital comprising 39.64 crore shares at a face value of Rs 1 each.
The cabinet also decided to offer NMDC employees 5 per cent of the shares for sale at a discount of 5 per cent.
NMDC, which has an annual capacity of 30 million tonnes, reported a 6 per cent rise in net profit at Rs 1,906 crore for the first quarter ended June 30. At present, the iron ore miner’s shares are trading at around Rs 185 apiece. The government had earlier put off the stake sale because of poor market conditions.
Possibly, to prevent a repeat, the government decided to allow the empowered group of ministers to change the method of sale if the situation demands. This is also being seen to accommodate the proposed exchange traded fund (ETF) to sell shares of PSUs to meet the divestment target.
The department of divestment is shortly expected to bring a note before the cabinet committee on economic affairs to launch the ETF.
The ETF will be a basket of shares of listed PSUs, and investment in it is expected to minimise the risk for people who wish to buy PSU stock. It will also be easier for the government to sell new PSU offerings in the market by simply getting the ETF to buy some part of the stock on offer.
Last month, the government cleared divestment in four public sector entities — NMDC, MMTC, OIL India and Hindustan Copper — which is estimated to fetch Rs 15,000 crore to the exchequer. The ETF is expected to mop up part of the sale if it is created.
Electronics policy
The cabinet also approved the National Policy on Electronics (NPE), which aims to create a domestic electronics manufacturing eco-system worth $400 billion in turnover by 2020.
The aim is to generate investments of about $100 billion to provide employment to around 28 million people by 2020.
“India is one of the fastest growing markets of electronics in the world. There is potential to develop the Electronic System and Design and Manufacturing (ESDM) sector to meet our domestic demand as well as to use the capabilities so created to successfully export ESDM products from the country. The National Policy on Electronics aims to address the issue with the explicit goal of transforming India into a premier ESDM hub,” said the government statement.
The policy plans to build a strong supply chain of raw materials, parts and electronic components to raise the local availability of these inputs from the present 20-25 per cent to over 60 per cent by 2020.
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