Cabinet nod to PSU buyback plan

Process for stake sale through market route in Oil India and other companies likely to begin soon

The government on Thursday gave its approval to the Central Public Sector Enterprises (CPSEs) to go for buyback of shares, as it auctioned five per cent shares of ONGC on the Bombay Stock Exchange.

Officials of the Department of Disinvestment (DoD) said, with the Cabinet nod, boards of cash-rich companies would be able to take a decision on buying back government stake. Coal India, NTPC, SAIL, NMDC, Oil India, BHEL and MMTC are among the companies with substantial cash.

Buyback and bulk sale, which include auction of shares, are part of the extended ambit of disinvestment options proposed by the Department of Disinvestment.

The Securities and Exchange Board of India (Sebi) has already put in place mechanisms for completing auctions and buybacks within days. The earlier process could take months. The government is possibly tapping the route to garner revenue from stake sale in the Central public sector enterprises quickly, as it has to look for resources to keep the slippage on the fiscal deficit front to the minimum.

The Cabinet nod for buyback will open another window for collecting more revenue from disinvestment during the last month of the financial year.

At the end of the 10 months ending January, the fiscal deficit was Rs 4,34,933 crore or 105.4 per cent of the target, according to the Controller General of Accounts figures released on Wednesday. The government had pegged the fiscal deficit for 2011-12 at 4.6 per cent of the gross domestic product or Rs 4,12,817 crore. The disinvestment target for 2011-12 is Rs 40,000 crore but the government has collected only Rs 11,44.55 crore this financial year, from stake sale in Power Finance Corporation. The ONGC auction conducted on Thursday is slated to add about Rs 13,000 to this account.

A senior disinvestment department official said opting for buyback and auction routes does not mean the government would not be use initial public offerings and follow-on public offers for disinvestment. The process for stake sale in a few other companies, including Oil India, was likely to start soon, he added.

The buyback proposal, along with other options, was presented before the Cabinet in the first week of January. But it was then decided that more discussion was needed before approval.