To Fund Welfare, NalCO, Neyveli show the way

Indian Express, June 24, 2006

TABLE: Potential proceeds from selling govt share in PSUs


Selling at most 10% Reducing govt share to 51%


Non navratna Rs.9,315 crore Rs.17,116 crore

Navratnas Rs.38,877 crore Rs.1,05,575 crore


Total Rs.48,192 crore Rs.122,692 crore


The sale of 5 percent equity in Power Finance Corporation and 15

percent in National Mineral Development Corporation is already

underway. The central government is expected to get Rs 3,500 crore

from these. On Thursday, cabinet decided to sell 10 percent of NALCO

and Neyveli. If it follows up these decisions by selling no more than

10 percent of the shares of all other big PSEs it could raise another

Rs.48,192 crore. This money would go to the National Investment Fund,

returns from which would finance social sector spending.

If the government were to sell not merely 10 percent but the entire

minority equity share, while it retains majority shareholding at 51

percent, it could raise Rs.1,22,692 crore. This could be

done over the next 2 years to allow the stock market to absorb these


A detailed firm-level analysis of the CMIE Prowess database, done by

The Indian Express, shows that besides the 4 firms where sale of

shares is already under discussion, there are another 17 big listed

public sector companies with a market capitalization of above Rs.5,000

crore (on June 21, 2006), where shares can be sold in the secondary

market. The sale of shares on the secondary market is particularly

easy since it can be done by a pre-announced screen-based auction.

However, considering the peculiar opposition to the sale of BHEL

shares by the Left on the grounds that it was a navratna, if the

government chooses not to sell any shares of any of the navratnas, it

could still raise Rs 17,116 crore by selling only non-navratnas and

bringing its share in them down to 51 percent.

So, for example, the central government owns 99.48 percent of the

shares of Hindustan Copper Ltd. Retaining 51 percent and selling the

rest could fetch the government Rs 3403 crore. The Central government

owns 63 percent of Container Corporation of India Ltd. Selling 12

percent would raise Rs 1179 crore. It owns 59.73 percent of SBI. If it

were to sell 8.73 percent, it would still be the majority shareholder

of SBI, and have Rs 3399 crore in its pocket. It owns 57.8 percent of

Punjab National Bank, it can sell 6.8 percent to raise 681 crores.

Even if the sale of shares is capped at a mere 10 percent, and even if

it is restricted to non-navratnas, this would give the central

government Rs.9,315 crore, and it is worth doing.

The sale proceeds would go into the National Investment Fund, which

has been set up for the purpose. The returns from the National

Investment Fund are to be used to fund social sector spending and

capital expenditure of PSEs. The purpose is to prevent spending

proceeds from disinvestment on day to day expenses of the government.

The UPA has not hesitated in initiating large spending programmes. It

should correspondingly now find the resources for these spending

programs by selling off PSUs.



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