To Fund Welfare, NalCO, Neyveli show the way
Indian Express, June 24, 2006
TABLE: Potential proceeds from selling govt share in PSUs
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Selling at most 10% Reducing govt share to 51%
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Non navratna Rs.9,315 crore Rs.17,116 crore
Navratnas Rs.38,877 crore Rs.1,05,575 crore
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Total Rs.48,192 crore Rs.122,692 crore
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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
shares.
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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