The Centre may consider amending the definition of government companies under the Companies Act to facilitate strategic divestment of public sector units, the Economic Survey has suggested.
At present, the government shareholding is below 60 per cent in about 30 per cent of listed central PSUs, limiting further disinvestment through the offer for sale (OFS) route, as it is stipulated in the Companies Act that a “government company” must have at least 51 per cent of its stake held by the Centre or state.
“Since effective control requires only about a 26 per cent stake, the government could consider amending the definition of “government company” under the Companies Act, limited to listed entities, to allow them to remain as government companies with a minimum of 26 per cent ownership, thereby retaining special resolution rights, while enabling the government to monetise its stake,” the Survey said.
Alternatively, the government could continue phased OFS below 51 per cent and even towards full exit, without changing the legal definition of “government company”, if the objective is eventual privatisation, it argued.
“This would enable the PSUs to function post-disinvestment as professionally managed entities with dispersed ownership, clear governance standards and transparent succession frameworks,” the Survey pointed out.
The observation comes at a time when privatisation and dilution of stake have slowed down. In this fiscal, the Centre has the target to mop up ₹47,000 crore from divestment, down from ₹50,000 crore it projected earlier, even as it was projected to rake in only ₹33,000 crore according to a revised estimate of FY25.
One of the big-ticket disinvestments gaining pace now is the privatisation of IDBI Bank.