Sebi approves Neyveli Lignite compromise

Workers call off strike; four Tamil Nadu government undertakings would buy Centre's shares, earlier to be divested in market, for Rs 500 crore

The Securities and Exchange Board of India (Sebi) has agreed to the proposal that Tamil Nadu government-run companies buy 3.56 per cent stake in centrally-run Neyveli Lignite Corporation (NLC), to meet the public shareholding rule of no more than 90 per cent to be held by the promoter.

The Centre, which has 93.56 per cent stake, had proposed to divest per cent in the open market and this had triggered an indefinite strike by all the worker unions in the Corporation, from July 5, which said it was a precursor for privatisation. The state government had supported the unions, denounced the Union’s move and then offered its own undertakings buy the required number of shares as an alternative.

With the announcement of the Centre’s and Sebi’s okay, the joint strike by the worker unions (there are 17,500 workers at NLC) has also been called off.

State chief minister J Jayalalithaa made the announcement on behalf of both governments. She said the agreement was done in Mumbai; four government companies would together spend Rs 500 crore to buy the said stake. These are the Tamil Nadu Industrial Development Corporation, State Industries Promotion Corporation of Tamil Nadu,  Tamil Nadu Urban Finance & Infrastructure Development Corporation and Tamil Nadu Power Finance & Infrastructure Development Corporation.

“The victory is due to my government’s continued action, my own independent steps, workers struggle and due to the united voice of the people of the state,” declared Jayalalithaa.

NLC is also an important source of electricity for Tamil Nadu, which faces a daily shortage, at the present level of demand, of 4,000 Mw. Of the generation from NLC units of 2,490 Mw, the share of Tamil Nadu is 1,178 Mw. The labour unrest had stopped all this.

It should be noted that apart from Jayalalithaa, all other political parties in the state had the same attitude on the Centre’s move.

After Jayalalithaa wrote to the Prime Minister on her counter-offer, on July 7, the latter replied on July 12, asking her government to nominate a nodal officer to finalise the said transaction. The CM directed a team from the state to meet the Union government and Sebi officials. The state team met the Union’s secretary, department of disinvestment, on July 10 and discussed the details. Then came Monday’s meet in Mumbai and the victory announcement.

Previous attempts to divest NLC shares to private investors, in 2002 and 2006, had to be aborted due to the pressure from trade unions and from the state government.

The government is required to bring down its stakes in state-owned companies below 90 per cent before August 9 to meet the minimum public shareholding requirements. The deadline for private companies to meet the norm— of  75 per cent in their case — was June 3. Sebi imposed various restrictions on shareholder rights of company promoters who did not comply with the rules.