Core Group Clears Strategic Sale In 3 Psus Up To 74% Clear

The core group on disinvestment yesterday cleared the strategic sale of up to 74 per cent equity in three public sector undertakings _ Kudremukh, Balco and Modern Foods_ and endorsed the earlier agenda to kick of the process with Concor in end-September.

The core group has also favoured a pruning of the issue of Videsh Sanchar Nigam Ltd (VSNL) and an GDR-cum-domestic offering in the case of Indian Oil Corporation.

The divestment process was expected to net the government Rs 5,000 crore.

The group also reacted "positively" to the proposal to set up a special purpose vehicle _ along the lines proposed by finance secretary Vijay Kelkar _ to pilot the future disinvestment process. The various ministries have been called upon to make their comments and get back to the core group in another fortnight.

The proposed SPV would help the government achieve its divestment objectives without engaging in "distress sales".

The government is veering around to the strategy of offloading only a part of the initially estimated shares and transfer the rest to the SPV. Thereby, it will ensure inflow of funds to the exchequer and a fair price on the government stakes.

The concept suggested by finance secretary Vijay Kelkar, seeks a reduction in the government's stake in select PSUs to 49 per cent by transferring surplus equity holding to the SPV _ in which the government holding would be 49 per cent. The board of the directors of the holding company will have a government nominee as the chairman.

The core group also accepted the submission of the lead managers of Concor to postpone the GDR issue by a fortnight from the initial target date of September 15.

The decisions of the core group will be now put up before the Group of Ministers which include the deputy chairman of the Planning Commission Jaswant Singh, finance minister Yashwant Sinha and human resource and development minister Murli Manohar Joshi. Once the Group of Ministers approves the decisions, it will be put before the cabinet for approval.

The cabinet has already approved market pricing as the basic principle for fixing the sale price, though the core group will fix a floor price (which will not be disclosed). This was a major shift from the past, when several issues were jeopardised because the administrative ministry had refused to relent on the pre-fixed price, even though market conditions dictated otherwise.