It is also contended that the functioning of many public sector units (PSUs) has been characterized by low productivity

, unsatisfactory quality of goods, excessive manpower utilization, inadequate human resource development and low rate of return on capital. For instance, between 1980 and 2002, the average rate of return on capital employed by PSUs was about 3.4% as against the average cost of borrowing, which was 8.66%. Disinvestment (or divestment) of the PSUs has therefore been offered as one of the solutions in this context

Disinvestment involves the sale of equity and bond capital invested by the government in PSUs. It also implies the sale of governments loan capital in PSUs through securitization. However, it is the government and not the PSUs who receive money from disinvestment. The fixation of share/bond price is an important aspect of disinvestment. Now, the Disinvestment Commission determines the share/bond price. Disinvested shares are listed, quoted and traded on the stock market. Indian and foreign financial institutions, banks, mutual funds, companies as well as individuals can buy disinvested shares / bonds.

Disinvestment is generally expected to achieve a greater inflow of private capital and the use of private management practices in PSUs, as well as enable more effective monitoring of management discipline by the private shareholders. Such changes would lead to an increase in the operational efficiency and the market value of the PSUs. This in turn would enable the much needed revenue generation by the government and help reduce deficit financing. However, to date the market experience has been otherwise. The large national budgetary deficit on revenue account has been increasing. The government has not used the disinvestment proceeds to finance expenditure on capital account; i.e. the disinvestment policy has resulted in capital consumption rather than generation. Administrative costs of the disinvestment process have also been unduly high. The actual receipts through disinvestment have often fallen far short of their target (see figure). During the period 1991-92 to 2002-2003, the government had targeted the mobilization of about Rs. 78,300 crores through disinvestment, but it could actually mobilize only Rs. 30,917 crores. Problems associated with Disinvestment A number of problems and issues have bedevilled the disinvestment process. The number of bidders for equity has been small not only in the case of financially weak PSUs, but also in that of better-performing PSUs. Besides, the government has often compelled financial institutions, UTI and other mutual funds to purchase the equity which was being unloaded through disinvestment. These organizations have not been very enthusiastic in listing and trading of shares purchased

they have been reluctant to prepare and distribute prospectuses. There has been some apprehension that disinvestment of PSUs might result in the �crowding out� of private corporates (through lowered subscription to their shares) from the primary capital market An important fact that needs to be remembered in the context of divestment is that the equity in PSUs essentially belongs to the people. several independent commentators have maintained that in the absence of wider national consensus.the �correct� valuation of shares. While the creation of PSUs originally had economic. Evolution of the Disinvestment Policy . Instances of insider trading of shares by them have also come to light. better / ethical management practices and better monitoring by the private shareholders in the case of the private sector � all of which supposedly underlie the disinvestment rationale � is not always borne out by business trends and facts. Also. their current restructuring through disinvestment is being undertaken primarily out of need of government finances and economic efficiency. Lastly. control and power. Inadequate information about PSUs has impeded free. the �crowding out� possibility. It is not clear if the rationale for divestment process is well-founded. since the PSUs do not benefit monetarily from disinvestment. as the government has retained a majority stake in them. social welfare and political objectives. All this has led to low valuation or under pricing of equity. disinvestment has not really changed the ownership of PSUs. The US economist Kenneth Galbraith had visualized a role of �countervailing power� for the PSUs. competitive and efficient bidding of shares. there is no decline in national wealth. the appropriate use of disinvestment proceeds and the institutional and other them as it would reduce their control over PSUs. Total disinvestment of PSUs would naturally concentrate economic and political power in the hands of the private corporate sector. and a free trading of those shares. a mere government decision to disinvest is not enough to carry out the sale of people�s assets. But the sale of such equity to foreign companies has far more serious implications relating to national wealth. Thus. particularly if the equity is sold below the �correct� price! If the disinvestment policy is to be in wider public interests. issues such as . in many cases. to the extent that the sale of government equity in PSUs is to the Indian private sector. it is necessary to examine systematically. The assumption of higher efficiency. Further. This has in turn prevented the disinvestment process from being completely open and transparent.

3. In the budget speech of 1996-97. Subsequently. It was also stated that the revenues generated from such disinvestment will be utilised for allocation to education and health sectors and for creating a fund to strengthen CPSUs 5.Thus. Defence aircraft and warships. when minority shareholding of the Central Government in 30 individual CPSUs was sold to selected financial institutions (LIC. 2. 72 CPSUs were .V. By 1997. the not so attractive shares also got sold. Atomic Energy Coal and lignite Mineral oils Mining of iron ore. improve management. the proposal to establish a Disinvestment Commission was announced. zinc. shares of individual CPSUs were sold and the category of eligible buyers was gradually expanded to include individuals. 3. UTI) in bundles. non-statutory. advisory body with Shri G. gypsum sulphur. as an independent. The policy on disinvestment has evolved through statements of Finance Ministers in their budget speeches. molybdenum and wolfram Minerals specified in the Schedule to the Atomic Energy (Control of Production and Use) Order. gold and diamond Mining of copper. The Rangarajan Committee recommended in April 1993 that the percentage of equity to be disinvested should be generally under 49% in industries reserved for the public sector and over 74% in other industries. The Public Sector Disinvestment Commission was established on 23rd August 1996. The number of listed CPSUs on domestic stock exchange stood at 42 as on 31. lead. NRIs and registered FIIs. for a period of three years. GIC. chrome ore. disinvestment of the Government’s equity in CPSUs (Central Public Sector Units) started in 1991-92. tin.2006. The Statement of Industrial Policy dated July 24.1. 1953 Railway transport 4. four other Members (part time) and a full time Member Secretary. 1991 stated that in the case of selected enterprises. VSNL (1998-99) and GAIL (1999-2000) all used the opportunity to access the GDR market.Arms and ammunition and allied items of defence equipment. sale through the GDR route was also initiated and MTNL (1997-98). Ramakrishna as full time Chairman. part of Government holdings in the equity share capital of these enterprises will be disinvested in order to provide further market discipline to the performance of public enterprises. enhance availability of resources for these CPSUs and yield resources for the exchequer. in order to ensure that along with the attractive shares. manganese ore. As per statement of Industrial Policy dated 24th July 1991 the following industries were proposed to be reserved for the public sector:. In the interim budget 1991-92. it was announced that the Government would disinvest up to 20 per cent of its equity in selected public sector undertakings in favour of mutual funds and financial or investment institutions in the public sector to broad-base the shareholding.

it was decided that reduction of the Government’s shareholding to 26% would not be automatic and the manner and pace of doing so would be decided on a case-by-case basis on the following considerations: a) Whether the industrial sector required the presence of the public sector as a countervailing force to prevent concentration of power in private hands. 8 cases were withdrawn. the Government classified the CPSUs into strategic and non-strategic areas for the purpose of disinvestment. recommending strategic sale in 28 cases. 7. equity sales in 6 cases and no change (disinvestment deferred) in 12 cases. 9. The Commission did not take up examination of the cases of six CPSUs. trade sale in 8 cases. The Commission submitted 12 reports for 58 CPSUs. the Government would continue to retain majority shareholding. 8. defence aircrafts and warships o Atomic energy (except in the areas related to the generation of nuclear power and applications of radiation and radio-isotopes to agriculture. For the nonstrategic CPSUs. medicine and non-strategic industries) o Railway transport. closure of 4 units. It was also decided to establish a new Department for Disinvestment to systematize the policy approach to disinvestment and privatisation and to give a fresh impetus to this programme. It was decided that the strategic CPSUs would be those functioning in areas of: o Arms and ammunition and the allied items of defence equipment. privatising non-strategic ones through gradual disinvestment or strategic sale and devising viable rehabilitation strategies for weak units. it was announced that Government's strategy towards the CPSUs would continue to encompass a judicious mix of strengthening strategic units. and b) Whether the industrial sector required a proper regulatory mechanism to protect the consumer interests before Public Sector Enterprises were privatised.referred to the Commission. the Government’s shareholding in CPSUs would be brought down to 26%. which were registered with the Board for Industrial & Financial Reconstruction (BIFR). it was announced that. In the budget speech of 1998–99. The Department came . The interest of workers would be protected in all cases. The tenure of the Chairman of the Commission was extended till 30th November 1999. All other CPSUs were to be considered as being non-strategic. Subsequently. In the budget speech of 1999-2000. In the case of CPSUs involving strategic considerations. 6. in the generality of cases. On 16th March 1999.

This additional allocation for the Plan would be contingent upon realisation of the anticipated receipts. 2004. The receipts from disinvestment and privatisation will be used for meeting expenditure on social sectors.000 crore was to be used for providing restructuring assistance to CPSUs. In a suo motu statement made in both Houses of Parliament on 9th December. the Government reiterated the policy as “The main objective of disinvestment is to put national resources and assets to optimal use and in particular to unleash the productive potential inherent in our public sector enterprises. In the budget speech of 20002001. The Commission ceased to exist from 1st November. 12. restructuring of CPSUs and for retiring public debt. examine and make recommendations in the light of the Government policies articulated earlier on 16th March 1999 and the budget speeches of Finance Ministers from time to time. 13. by the then Minister of Disinvestment. The policy of disinvestment specifically aims at: . ONGC and GAIL. The Disinvestment Commissions in 25 reports submitted between February 1997 – March 2004 disinvestment through strategic sale in 59 cases. it was announced that the main elements of the Government’s policy were to restructure and revive potentially viable CPSUs. it was decided that Multi State Cooperative Societies under the Department of Fertilizers be allowed to participate in the disinvestment of fertilizer CPSUs including National Fertilizers Limited. 2002. 5. R. In December 2002 on the basis of a proposal of the Department of Fertilizers. safety net to workers and reduction of debt burden and a sum of Rs.000 crore for providing additional budgetary support for the Plan. bring down Government’s shareholding in all non-strategic CPSUs to 26% or lower. The then Ministry of Disinvestment had informed the Commission on 23rd January 2002 that all non-strategic CPSUs. close down CPSUs which cannot be revivved. In the budget speech of 2001 – 2002. The Public Sector Disinvestment Commission was re-constituted on 24th July 2001 for a period of two years with Dr. The Government decided in September 2002 that CPSUs and Central Government owned cooperative societies (where Government’s ownership is 51% or more) should not be permitted to participate as bidders in the disinvestment of other CPSUs unless specifically approved by the Core Group of Secretaries on Disinvestment (CGD). disinvestment other than strategic sale in 32 cases and closure was recommended in 4 cases. it was announced that CPSUs must be strengthened to compete and prosper in the new environment. 12. and fully protect the interests of workers. Patil as Chairman (part time) along with four other Members (part time) and a full time Member Secretary. including subsidiaries. stood referred to the Commission for it to prioritize. 10. if necessary. Out of this. A receipt of Rs. The term of the Commission was subsequently extended till 31st October 2004. 14.into being on 10th December 1999. primarily in the social and infrastructure sectors. Reconstituted Public Sector Disinvestment Commission 11. an amount of Rs.H. 7. but excluding IOC.000 crore was budgeted from disinvestment.

This Fund would be used for financing fresh employment opportunities and investment. For the disinvestment of natural asset companies. In order to provide complete visibility to the Government’s continued commitment of utilisation of disinvestment proceeds for social and infrastructure sectors. would be finalized early in 2003-04 Current policy on disinvestment and programmes In May 2004. It would also ensure that disinvestment does not result in private monopolies. the Government would set up a Disinvestment Proceeds Fund. 16. the Ministry of Finance and the Ministry of Disinvestment would work out guidelines. remain where they are. the Government announced that details regarding the already announced Disinvestment Fund and Asset Management Company. remain where they are. the Ministry of Finance and the Ministry of Disinvestment would work out guidelines.Modernization and up gradation of Public Sector Enterprises Creation of new assets Generating of employment Retiring of public debt Government would continue to ensure that disinvestment does not result in alienation of national assets. The relevant extracts of NCMP are: “The UPA Government is committed to a strong and effective public sector whose social objectives are met by its commercial functioning. there is need for selectivity and a strategic focus. which. This Fund would be used for financing fresh employment opportunities and investment. The then Ministry of Disinvestment issued guidelines regarding Management-Employee Bids in Strategic Sale on 25th April 2003 to encourage and facilitate the participation of employee participation in strategic sales. through the process of disinvestment. For the disinvestment of natural asset companies. It would also ensure that disinvestment does not result in private monopolies. which. In order to provide complete visibility to the Government’s continued commitment of utilisation of disinvestment proceeds for social and infrastructure sectors. The UPA is pledged to devolve full managerial and commercial autonomy to successful. and for retirement of public debt.” 15. But for this. Generally profit-making companies will not be privatized. The Ministry of Finance would also prepare for consideration of the Retiring of public debt Government would continue to ensure that disinvestment does not result in alienation of national assets. All privatizations will be considered on a transparent and consultative . the Government would set up a Disinvestment Proceeds Fund. The Ministry of Finance would also prepare for consideration of the Cabinet Committee on Disinvestment a paper on the feasibility and modalities of setting up an Asset Management Company to hold manage and dispose the residual holding of the Government in the companies in which the Government’s equity has been disinvested to a strategic partner. to hold residual shares post disinvestment. and for retirement of public debt. Government adopted the National Common Minimum Programme (NCMP). In the budget speech for 2003-04. through the process of disinvestment. which outlines the policy of the Government with respect to the public sector. profit-making companies operating in a competitive environment.

52/.per share. The Issue Price was fixed at the top of the Price Band (Rs.44/.39.930 equity shares by the company was open for subscription from 10th September. 2007. Public sector companies and nationalized banks will be encouraged to enter the capital market to raise resources and offer new investment avenues to retail investors” Proposals under Implementation IPOs of Power Companies Three power basis. Government has decided on 8. at Rs.82 crore accrued to Government account from the sale of its shares in PGCIL.2. 5% and 5% respectively out of its shareholding. consisting of an ‘Offer for Sale’ of 19. While every effort will be made to modernize and restructure sick public sector companies and revive sick industry. This set of policies can broadly be classified into two groups: .965 equity shares out of Governments shareholding and a fresh issue of 38.per share) viz. It will not support the emergence of any monopoly that only restricts competition. chronically loss-making companies will either be sold-off. viz. The UPA will induct private industry to turn around companies that have potential for revival.. 2007 to 13th September.13. Power Grid Corporation of India Limited (PGCIL) and National Hydro-electric Power Corporation Limited (NHPC). 2007 and trading in the shares of PGCIL commenced on 5th October. The issue was oversubscribed by 64. Rural Electrification Corporation Limited (REC). an amount of Rs.994. Accordingly. The UPA Government believes that privatization should increase competition. for example. The NEP consisted of wide ranging economic reforms.2007 to piggy-back with an ‘Offer for Sale’ of Rs.10. or closed. 1651 crore. the use of privatization revenues for designated social sector schemes.32. The thrust of the policies was towards creating a more competitive environment in the economy and removing the barriers to entry and growth of firms. The realisation based on book value has been estimated at Rs. The money was credited to Government account on 3rd October.8 times. not decrease it.895 shares of Power Grid Corporation of India Limited (PGCIL).26.21. It also believes that there must be a direct link between privatization and social needs – like. 2007. propose to make public offerings of equity equal to 10% each of their pre-issue paid-up equity capital.52/. after all workers have got their legitimate dues and compensation. While every effort will be made to modernize and restructure sick public sector companies raise resources from the capital market. The UPA will retain existing “navratna” companies in the public sector while these companies raise resources from the capital market. Brief on the Initial Public Offering of shares of Power Grid Corporation of India Limited (PGCIL) The Initial Public Offering (IPO of 57. The actual realization is expected to be higher and would depend on the prevailing market condition.

Thus Disinvestment refers to the sale or liquidation of an asset or subsidiary of an organization or government. Due to lack of improvement of performance in such units. For instance the average return on investment was hardly 2% during the 1980s and 1990s. It is also known as divestiture or divestment. these deficits lead to rising prices which in turn affected the economy. aimed at improving the efficiency of the economy and increasing its international competitiveness by removing the rigidities in various segments of the Indian economy. However it did not stake any cap or limit on the extent of disinvestment. family welfare and so on. awarding important contracts etc. The main objective was to improve overall performance of the PSEs.The stabilization measures . This has lead to poor performance of the PSUs. In India the process of disinvestment began since 1991-92. To overcome the problem of political involvement in PSUs There was too much political interference with respect to location of the project.e. it would enable the government to concentrate on the government’s main job i. It also did not restrict disinvestment to any class of investors. There was a need to maintain sufficient foreign exchange reserves and keep the rising prices under control. Enable the government to concentrate on Social development It is of the belief that by transferring PSUs to private players.are long-term measures. . The need for disinvestment arises from the fact of poor performance of PSUs. To reduce budgetary deficits One of the factors of budgetary deficits is the allocation of huge amount of funds to PSUs. The major thrust for Disinvestment Policy in India came through the Industrial Policy Statement 1991. Disinvestment means selling government equity in public sector units (PSUs) to private parties. intended to correct some of the weaknesses that have developed in the balance of payments and to bring inflation under control. selection and promotion of top personnel. law and order. social development in areas such as primary health. OBJECTIVE OF DISINVESTMENT: To improve performance of units The main argument in favor of disinvestment is the poor performance of PSUs. The structural reform measures .The policy stated that the government would disinvest part of their equities in selected PSEs. primary education.are short term measures.

99. which were given a special role in India’s planned economy. 2009. 100 per cent in lignite. on 5th November 2009 has approved the following action plan for disinvesting Government equity in profit making CPSUs: . 74. crude oil and zinc. At the end of the fiscal year 2000-01. The Government. and part of this wealth should rest in the hands of the people. 2. investment had soared to Rs. there were 244 PSEs and the investment in them had gone up to Rs. At the end of the Seventh Plan in 1990. 13. The above policy was reaffirmed by the Finance Minister in paragraph 37 of his Budget Speech on 6th July. almost 50 per cent in aluminum and over 30 per cent in finished steel.OTHER OBJECTIVES WOULD INCLUDE • • • • • To provide better service to customers To ensure proper planning and execution To overcome the problem of corruption To fix the responsibility on management To make efficient use of disinvestment proceeds Public sector enterprises (PSEs) or Public Sector Units (PSUs). PSEs had a total investment of Rs. grew both in terms of numbers and investment for over four decades from the early 1950s. I must state clearly that public sector enterprises such as banks and insurance companies will remain in the public sector and will be given all support. 114 crores.610 crores. over 80 per cent in coal. at the end of the Eighth Plan in 1997. 2. I propose to encourage people’s participation in our disinvestment programme. My Government will develop a roadmap for listing and people-ownership of public sector undertakings while ensuring that Government equity does not fall below 51 %. 329 crores. Although disinvestments had started from the early 1990s. including capital infusion. Paragraph 37 of FM’s Budget Speech reads as: The Public Sector Undertakings are the wealth of the nation. The PSEs made a significant contribution to industrial production. to grow and remain competitive. 2009 and reads as under: Our fellow citizens have every right to own part of the shares of public sector companies while the Government retains majority shareholding and control. Here. CURRENT POLICY ON DISINVESTMENT The policy on disinvestment has been articulated in paragraph 34 of President’s Address to Joint Session of Parliament on 4th June. While retaining at least 51 per cent Government equity in our enterprises.

ADVANTAGES OF DISINVESTMENT POLICY 1. .it makes no sense to purchase an asset unless it provides at least a rate of return equal to the rate of interest on government securities. to think that sale of PSU shares is the only method of reform. b. The status quo ante will be restored from April. 2009 to March. On the other hand. the whole disinvestments programme has been carried out by the government in a hasty. According to experts. whatever be the technique. which really means that the State exchequer has lost the money. The private sector must believe that it is capable of generating more profits than the public sector. Treating process of disinvestment as revenue in budgets creates pressure in selling. 2012 would be available in full for meeting the capital expenditure requirements of selected social sector programmes decided by the Planning Commission / Department of Expenditure. As pointed out by experts. 2. The asset must be undervalued so that the actual rate of return for the private buyer turns out to be higher. Critics point out that.i) Already listed profitable CPSUs. Most of the public sector companies are loss-making and are a burden on public funds. not meeting the mandatory public shareholding of 10%. However this is only one part of the story. are to be made compliant. from the private sectors point of view. unplanned and hesitant way. apart from being fiscal imprudence. out of Government shareholding or issue of Fresh Equity by the company or a combination of both. 2012. ii) All CPSUs having positive net worth. the capital proceeds could be used to consolidate and revitalise Navratnas. reflects a closed mind. because that is where the private investor could otherwise put the money. In the hands of the private sector. the public sector companies are also corruptly managed. This means that for such sales to occur. then the government would lose future income by selling it. and iii) The proceeds from disinvestment would be channelized into National Investment Fund and during April. no accumulated losses and having earned net profit for the three preceding consecutive years are to be listed through Public Offerings. As a result. Since the government is corrupt. either a. if the government sells the asset that provides income or profit equal to or more than the prevailing interest on government securities. 3. the public sector companies would be run more efficiently. the public sector equity has been sold for a fraction of what it could actually fetch.

Investment decisions before Disinvestment and Investment requirement from the private participants post disinvestment. The government has used these proceeds to offset the shortfalls in revenue receipts and thus reduce the fiscal deficit which it was required to do as a part of the IMF stabilization programme. management of Public Enterprises Debt. Recent Investments in IPO Ennore Port is mulling to raise funds from the market for the Rs 1. categorizing the Social Assets and economic assets of the PSU’s. besides deepening of approach channel to 20 metres for handling capesize bulk carriers.The present policy has deprived the government of future yield from these enterprises. The proposed projects include building rail and road connectivity. probable environmental concerns. It is in this context that the country's only corporate port entity is proposing to float initial public offer ( IPO )) for the funds. However. The correct policy would have been to allow the public sector themselves to use the resources they generate via this programme.600-crore capital expenditure programme it envisaged for the next five years. political and legal issues such as Debate on the Sale Profitable vs. the port being a mini-ratna. This would have helped them to revitalize and expand their activities .The entire manner in which the proceeds from the disinvestments have been used is also being debated. debate on the sale of Large or Small Firms. Unprofitable Enterprises. The disinvestments of governments proceeds in profitable public sector enterprises and using the proceeds for current consumption needs amounts to frittering away of valuable public assets. DIS ADVANTAGES OF DISINVESTMENT POLICY • • • • • • • • • • • Poor performance of disinvestment in India Poor Management Lack of environment creation Delay tactics Selfish interests Some PSUs were not worth (Bharat Leather Corporation. can not expect to receive any financial support from the government towards the expansion. Scooters India Ltd) Unproductive use of disinvestment proceeds Disinvestment and Unemployment Profit hungry private sector Lower value of realization Privatization leads to concentration of wealth CONCLUSION The debate and the case study indicates that there are many complicated economic. The port has two shareholders: .

5 billion on last day. the Centre last week decided to sell 10% of its equity in Shipping Corporation of India through a follow-on public offer. according to sources. 11 Aug. The initial public offer (IPO) of India's largest coal producing company Coal India (CIL) has seen huge response from investors and has received bids for more than USD 53 billion worth of equity shares as against issue size of USD 3. Though in the initial stages yet. the Cabinet Committee on Economic Affairs will take the final decision. the port is expected to submit a plan before the ministry can take a call.7 times). the issue would be in line with the disinvestment policy of the government.4 billion. With the ministry of shipping planning to corporatise more ports within its control.31 times while employees' portion was subscribed just 0. 2010 The government is now looking to add MMTC and Shipping Corporation of India to its disinvestment list. Accordingly. respectively. the Disinvestment Department in finance ministry will take a view. including major contribution from qualified institutional buyers (QIBs) followed by non-institutional investors (NIIs) and retail investors.Centre (68%) and Chennai Port Trust (32%) and with issuance of share. raising the possibility of the proceeds crossing the .28 times. the shareholding of the Centre could fall from its current level. For the reserved portion of QIBs (which closed on Wednesday and was subscribed 24. For example. According to port analysts. if the float materialises. in which the company will also issue fresh shares. the way this first corporate entity performs will help shape the future course of India's 12 major ports. foreign institutional investors put in bids for USD 27. Once the ministry agrees.000 crore through disinvestment. (USD 1 = Rs 44) The reserved portion of non-institutional investors was subscribed 25. Accordingly. the Centre has approved Steel Authority of India and Coal India to go for public offer of shares as it seeks to raise Rs 40. Similarly. the government is seen diluting its stake in various undertakings.1 times.5 billion worth of equity shares followed by domestic financial institutions and mutual funds with USD 10 billion and USD 1. The issue has been subscribed more than 15. Institutional investors have gone all out for Coal India with the IPO getting highest-ever demand received by an Indian issue.4 times and retail 2.

000 crore in 2009-10.” minister of state for finance Namo Narain Meena told Rajya Sabha in a written reply. The Shipping Corporation board will take up a proposal for issue of 10% fresh equity in the proposed offer on Wednesday. All these companies could raise Rs 28. The Coal India public offer. the Centre will offload 10%.70 crore on the Bombay Stock Exchange. respectively. At Tuesday’s closing price of Rs 1. which is expected to fetch about Rs 2. a 10% stake sale in the company could raise nearly Rs 15. while the state governments of Maharashtra and Madhya Pradesh would dilute 5% each. Power Grid and Hindustan Copper and Manganese Ore India. However.549. is expected to prompt many PSUs to shed their reservations and access markets. and it has shortlisted merchant bankers to manage the MOIL offer. is expected by October and could help the government raise over Rs 17. According to the disinvestment policy approved by the Cabinet. all listed . tipped to be the largest offer from a public sector company. while Maharashtra and Madhya Pradesh have 9. Shipping Corporation of India (SCI).500 crore.budgeted Rs 40. “Government is considering stake sale through public offerings in MMTC. The government filed the offer document for a 10% stake sale in Coal India on Monday.000-crore mark for the current fiscal.000 crore. It had raised Rs 25. The Union Cabinet has already approved disinvestment in Coal India.000 crore for the government while a 10% stake of MMTC alone could fetch over Rs 15. Coal India. The government will disinvest 10% in the offer. the stake sales in SAIL and MOIL may happen only in the next calendar. SAIL. The Centre holds 81.62% and 8. A change in the public holding norms. Steel Authority of India (SAIL). Manganese Ore India (MOIL) and Hindustan Copper India. In a move towards disinvestment. Many public sector firms like CIL and Nalco as well as the department of disinvestment had sought a review of the norms apprehending a negative impact on the valuations. giving relaxation to public sector entities to list on bourses with 10% float. The government has so far mopped up about Rs 2. In MOIL.57% in the mini-ratna entity.000 crore through stake sale in Satluj Jal Vidyut Nigam and Engineers India. the MMTC board recently approved a proposal for stock split and issue of bonus shares.000 crore.81% stake. Power Grid Corporation.000 crore.

500 cr network .BSNL floats tender for defence .Insurance firms may have to wait longer to list Also Read Related Stories News Now - Roaring markets end on a modest note Balaji gets Rs 223.56/ litre More The public sector unit (PSU) has been negotiating with the trade unions. Click here to visit SME Buzz Also Read Related Stories News Now .Pyramid Saimira moves SAT .63 cr tax notice JP Morgan sees tablets to grow into $35 bn mkt by 2012 Growth-oriented Budget: Dikshit Losses on diesel sales at Rs 12. but I certainly hope that it does happen. The government had earlier proposed to divest 10 per cent stake. BSNL IPO may happen in 2010-11: Disinvestment secy The government has rapped state-owned Bharat Sanchar Nigam Ltd (BSNL) for poor financial performance and made a case for disinvestment through an initial public offer (IPO).” Disinvestment Secretary Sunil Mitra told a private news channel. I can’t say exactly when.6% in 2009 . .R-Infratel plans pre-IPO sale to raise Rs 2. The unions say disinvestment or listing would serve no interest of people.PE deals dip 63. “I hope the BSNL IPO happens in the coming year (2010-11). because BSNL does need to open up to public ownership. primarily with a view to strengthen its own management and its accountability. which have been opposing any disinvestment.profitable PSUs should have a public holding of at least 10% and all profitable unlisted CPSUs should be listed.Indian IPO market touched 5year low in '09 .

after inaugurating India’s first aerospace special economic zone built in Belgaum by Karnataka-based QuEST Global. is struggling to retain its fifth position in the market. and Air India being expected to suffer substantial losses for a period of at least two more years. 400 crore each. The company is also in the process of adding to its Global System for Mobile Communications (GSM) capacity. Air India divestment is not possible in this framework. The Rs. The minister however. as the cash-strapped carrier would not be able to bring in funds through disinvestment or an IPO for a period of at least five more years. the threeyear-profit rule would mean it cannot be a disinvestment candidate for at least five more years. the government will stick to the criteria of ‘three-year-profit rule’ while divesting its stake in companies. as you know. Disinvestment and listing are expected to help the PSU take decisions faster and compete with the private sector. It had floated the tender nearly 18 months ago.” he said. Since Air India has not made any profits in the last two years and its losses are expected to continue for at least two more years. BSNL. The 300-acre SEZ. That is not on the cards. involves an initial investment of Rs. When asked whether Air India’s divestment is possible under a policy announced on November 5.“The company’s financials are doing pretty badly and it certainly shouldn’t be so because telecom. 150 crore. it has faced bureaucratic hurdles in placing orders with the lowest bidders. said the government has agreed to provide equity support of Rs. an exception is allowed to a company not satisfying any or all of the five conditions. This is because of two reasons: the Union Cabinet’s decision to list only profit-making public sector enterprises (PSUs).” “The Cabinet policy on disinvestment is only for profit making CPSUs. Patel has so far maintained that the government will try to list Air India on the stock exchange in the ‘near future’ but this is the first time he has ruled out any divestment. besides four other key conditions. Despite equity support from the government.” Mitra said. Civil aviation minister Praful Patel on Saturday told FE. .000 crore. the financial mess at Air India is unlikely to abate soon. “Not at all. 800-crore equity infusion requires a Cabinet clearance. According to a disinvestment department official. which is desperately seeking financial support from the government. is one of the sectors that you have to be competitive and they (BSNL) have to pull up. Such a company would have to go through a ‘mandatory book building issue’. Being a government-owned company. Disinvestment secretary Sunil Mitra on Friday ruled out any exception for loss-making PSUs and said the government will stick to the Securities and Exchange Board of India rules while divesting government stakes in such companies. a lack of funds could potentially exacerbate the problems at Air India. which was eyeing a top slot in the mobile market at one point of time. 800 crore to Air India in the next two months. Sebi rules state that a company going for an IPO should have a track record of distributable profits for three out of preceding five years. at an investment of over Rs 35. wherein qualified institutional investors (QIPs) need to subscribe a minimum of 50% stake being offered for sale. founded by Aravind Melligeri and Ajit Prabhu. and it is likely to come in two tranches of Rs. The government may announce a roadmap for disinvestment in PSUs through IPOs and follow-on public offer (FPOs) by March this year and BSNL could be one of the 60 PSUs identified by the government. However. Also.

It’s seat factor.000 crore into Air India over a period of three years. 5548 crore in 2008-09. The turnaround at Air India could take another 4-5 years. which is the number of seats booked in proportion to total seats.5% in September. 2. according to a secretary-level official. up from Rs.5% in September. Air India’s market share rose to 18. subject to substantial cost cuts and revenue enhancement. The government has agreed to an equity infusion of up to Rs.000 crore in the current fiscal. has improved to 72.Air India suffered losses of Rs.400 crore in 2007-08.8% in October from 67.6% in October from 17. according to data from the directorate-general of civil aviation. 5. . Officials expect it to incur further losses of at least Rs. 5.

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