PM to ministries: Tap all means for stake sale

The government holds 67.7% stake in Bhel

Amid the opposition to plans of disinvestment in Bharat Heavy Electricals Ltd (Bhel) and Coal India Ltd (CIL), Prime Minister Manmohan Singh on Tuesday asked the nodal ministries of these entities to consider various options for selling stake in these companies. He added dividend payment to the government should also be looked at.

“Bhel and Coal India have been asked to come back with various options. These are buyback, dividend payments and disinvestment,” Finance Minister P Chidambaram said after a meeting on disinvestment, convened by Singh.

At the meeting, also attended by Heavy Industries and Public Enterprises Minister Praful Patel, Coal Minister Shriprakash Jaiswal and Mines Minister Dinsha J Patel, it was said market conditions weren’t favourable for disinvestment in Bhel, according to those in the know.

The government holds 67.7 per cent stake in Bhel.

In August 2011, the Cabinet Committee on Economic Affairs had approved the disinvestment of five per cent government stake in the company, but no action has been taken since then.

Last week, the finance ministry had sent a draft Cabinet note to the Prime Minister’s Office, proposing five per cent stake sale in CIL. But, unions are opposing the disinvestment. “Their (the ministries’) view was the current market conditions weren’t favourable,” an official said, adding as of now, there were no plans of disinvestment in CIL and Bhel.

After the meeting, Coal Minister Jaiswal said, “Discussions (on disinvestment in CIL) are underway and no decision has been taken.”

At the meeting, residual stake sale in Hindustan  Zinc and Balco was also reviewed. While the mines ministry feels the move requires an amendment to the Metal Corporation (Nationalisation and Miscellaneous Provisions) Act,1976, the finance ministry doesn’t.

It was likely the finance ministry would soon circulate a Cabinet note on residual stake sale in Hindustan Zinc, an official said. The ministry had already sent its views on stake sale in the Vedanta Group-owned Hindustan Zinc to the law ministry, he added.

In 2002, the government had sold 26 per cent stake in Hindustan Zinc to Vedanta for Rs 445 crore. Later, it sold an additional 18.9 per cent stake to Vedanta, under a ‘call’ option.

Currently, the Centre holds 29.5 per cent stake in the company. It also holds 49 per cent stake in Balco and is considering exiting the firm in which the Vedanta Group holds majority stake.

Chidambaram has recused himself from the decision on residual stake sale in Hindustan Zinc and Balco, as he has been a lawyer for Vedanta.

So far this financial year, the government has raised about Rs 1,500 crore from disinvestment, against the target of Rs 40,000 crore for the entire financial year. In this, it was aided by the requirement to meet the Securities and Exchange Board of India’s norm of at least 10 per cent public float.

Meanwhile, the follow-on-public offer (FPO) for 17 per cent stake sale in PowerGrid Corporation, expected to garner Rs 7,083 crore, opened on Tuesday.

Disinvestment proceeds are vital to contain the Centre’s fiscal deficit at 4.8 per cent gross domestic product, as estimated in the 2013-14 Budget. For the April-October period, the deficit had accounted for 84 per cent of the estimate for the entire financial year.