Ordinance On Share Buy-Back Likely
The BJP government is likely to issue an ordinance to allow buy-back of shares by corporates, according to a minister in the Vajpayee government.
The buy-back provision would, however, be subject to government clearance.
Concerned ministers have informally decided to get such an ordinance promulgated. The Union cabinet is yet has to take a formal decision.
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The cabinet had earlier decided to introduce a bill in the Lok Sabha in the budget session to allow buy-back. However, it could not be introduced as the bill got stuck in the ministry of law, justice and company affairs, which is headed by AIADMK's M Thambidurai.
Thambidurai has suggested an amendment to the draft Bill, making it mandatory for companies planning buy-back to obtain permission of the ministry.
Meanwhile, the BJP has strongly recommended that the government should get such an ordinance promulgated at the earliest.
The party's economic cell met recently and concluded that this should be immediately done to revive the capital market and check slowdown of industrial production.
Some party leaders held that by doing this the government would fulfil a major demand of the industry, which has been disappointed after this was not done through the budget.
Making the buy back arrangement subject to government clearance would be short of the industry's demand, but it would be a step in the right direction, the cell concluded.
The agenda of the cell's meeting was to suggest measures to create industry's confidence in the economy.
Capital market expert P N Vijay was invited to the meeting as a consultant.
Among others who attended the meeting were party vice-president Jana Krishnamurthy, economic cell members Jagdish Shettigar and R Ramakrishnan, besides JC Jaitley, who is a member of the finance commission.
The cell also recommended that the government should allow FIIs in the housing sector with the provision that the money generated through floating shares should be utilised exclusively for real estate.
These FIIs could be allowed a majority holding as housing is a non-strategic sector, a party member said.
This would revive the iron and steel and cement industries by creating additional demands, he said.
This would also create employment, he added.