The Union cabinet is expected to soon consider the Narendra Modi-government’s plan to reduce the Centre’s stake in certain public sector undertakings to below 51 per cent, while continuing to retain management control over them.
The proposal may see government stakes being reduced in some blue chip PSUs such as ONGC, Indian Oil Corporation and GAIL India.
“The cabinet note to bring about changes in the Companies Act is being prepared and could be taken up soon, which would pave the way for diluting the government’s stake while maintaining management control,” officials said.
The stake sale would also help to meet the divestment target set by the government and bring in more value to retail investors, they said.
Clause 45 of the Companies Act says, “Government company means any company in which not less than fifty-one per cent of the paid-up share capital is held by the central government, or by any state government or governments, or partly by the central government and partly by one or more state governments, and includes a company which is a subsidiary company of such a government company.”
In her budget speech, finance minister Nirmala Sitharaman had stated that the “government has been following the policy of divestment in non-financial PSUs maintaining government stake not below 51 per cent. The Centre is considering, in case where the PSU is still to be retained under government control, to go below 51 per cent to an appropriate level on a case-to-case basis”.
A bill to amend the Act would be brought during the winter session of Parliament.
The amendment would give the government a free hand to dilute its stake in state-owned firms. Officials, however, said the government did not intend to give the approvals on a case-to-case basis. Instead, it might formalise a set-up, such as a group of ministers or the Niti Aayog, to carry out the exercise.
Blue chip PSUs
Some of the blue chip PSUs where the government holds around 51 per cent and were feeling constrained from selling shares include Indian Oil Corporation (52.18 per cent stake), Bharat Petroleum Corporation (53.29 per cent), GAIL India (52.64 per cent) and PowerGrid Corporation (55.37 per cent).
Officials said in many PSUs, where the government has a 51 per cent stake, the holdings of state-controlled entities such as LIC, GIC, SBI taken together raises the stake to beyond 80 per cent.
“Effectively, the government holds more than 80 per cent in most of the PSUs. If all these put together can be permitted to go only up to 51 per cent, we will get a lot of leg room to dilute the government holding to below 51 per cent,” they said.
Private sector route
Moreover, private promoters have management control with smaller stakes in their companies.
Officials said the government, too, can lower its stake to below 51 per cent and still wield control.
The government has managed to raise only Rs 12,357 crore so far from divestments out of the budgeted target of Rs 1.05 lakh crore.