Gail, Itdc Top Divestment Panel List

The Disinvestment Commission has shortlisted the Gas Authority of India Ltd (GAIL), Modern Foods Ltd (MFL) and India Tourism Development Corporation (ITDC) for the third tranche of disinvestment of government stake in public sector undertakings (PSUs).

In its full report, submitted to the industry and finance ministers yesterday, the commission has also suggested a long-term strategy for restructuring the PSUs to ensure better price realisation for the government.

Recommending the book-building method for fixing the price of public offers, the commission has suggested selecting merchant bankers to an issue through competitive bidding.

The commission has recommended retailing of the PSUs shares to small investors and employees to ensure wide dispersal of shares. It has set a ceiling of 200 shares for allotment to employees and suggested a discount of 10 per cent for the small investors.

 

One of the commissions recommendations is the setting up of a Pre-Investigation Board on the lines of the Bank Frauds Commission, set up by the Reserve Bank of India recently, to sieve cases of corruption and malafide intent in corporate decision-making by the PSU chiefs and boards.

As promised, we propose to go about the disinvestment process in a transparent manner, commission chairman G V Ramakrishna said while releasing a summary of the report to the media.

For each of the three shortlisted PSUs, the report has outlined three different modalities.

In case of MFL, an outright sale through competitive bidding on as-is-where-is basis has been recommended. In case of GAIL, the commission has recommended a maximum of 49 per cent disinvestment, 25 per of which should be immediate.

Classified as a non-core PSU, the commission has adopted a mixed approach for ITDC, combining outright sale with divestment of management control.

Outright sale has been recommended for the hotels in smaller towns, franchising and divestment of management control for hotels in the metropolitan areas and the divestment of management control for the luxury hotels.

Since the hotel industry is labour-intensive, the committee has also recommended the setting up of a tripartite committee, consisting of representatives from the government, management and the trade unions to facilitate the transition.

The report has also classified 35 out of the 40 PSUs referred to it for disinvestment as core and non-core companies. Divestment of up to 49 per cent has been recommended in the case of the core sector units and up to 74 per cent has been recommended in the non-core PSUs.

The report has also provided for revision of the classification with the changing environment.

Formation of a Standing Empowered Group (SEG) consisting of the cabinet secretary, the secretaries of the ministries concerned besides the CEOs of the PSUs, has been suggested to select the financial adviser, supervision of the sale, pricing, timing and selection of instruments for disinvestment.