Govt readies big bang divestment

Aims To Mop Up Over Rs 25,000 Crore In 2009-10 To Battle Fiscal Deficit

New Delhi: With 'red' flag out of sight, the government plans big-bang disinvestment in state-owned public sector undertakings (PSUs), looking to raise over Rs 25,000 crore in 2009-10, not just to reduce fiscal deficit but also to expand public sector enterprises.
    The disinvestment department, which was out of action for some time due to strong opposition from the Left parties against any sell off of government stake in PSUs directly or indirectly, has again come under the limelight.
    Leading merchant bankers are approaching the department's officials to get business in the near future.
    One such banker said the department is ready with a number of proposals of stake sale in the coming months. Draft prospectus of PSUs like Oil India, National Hydro Power, RITES and UTI Asset Management Co have already been cleared by market regulator Securities and Exchange Board of India (Sebi).
    As the sentiment in the equity market is much better now, these companies may decide to go ahead with their public issues soon.
    A senior government official said that when the sensex was hovering around 6,000 points in 2003-04, the government could raise Rs 15,500 through divestments. With sensex around 14,500 now, the Centre can eye anything above Rs 25,000 crore.
    The main chunk of funds, a source said, would come from divestment in blue chips like BSNL, MMTC, NMDC, Coal India, NTPC and NALCO. Disinvestment of up to 10% in BSNL alone could fetch around Rs 20,000 crore. Similarly, the market capitalisations of MMTC and NMDC are at present around Rs 1,60,000 crore and Rs 1,40,000 crore respectively, with the government's holdings around 99%. Divestments in these companies can also raise substantial funds, the source added.
    According to a Religare report on disinvestment, a government committee had already recommended selling off of stakes in 25 companies. But, because of the Left's opposition, the government could not proceed. As the scenario has changed now, the government is likely to go ahead with disinvestment of its stakes in these companies.
    The government had sold 51% stake in Bharat Aluminium to Sterlite Industries, which is now called Vedanta. As per the original agreement with Vedanta, the government should sell the remaining stake too. As the management has already been transferred to the private partner, the government is considering exiting the company.
    The government had similar plans for other state-run companies too (see chart). The source said that as the commercial reality has not changed much since then, the government may decide to proceed with the strategic sale now as there would not be much opposition.

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