MoF agrees for disinvestment trust

NEW DELHI, NOV 12: Finance ministry has agreed to Disinvestment Commission's suggested mechanism to permit divestment in PSUs by transfer of...

NEW DELHI, NOV 12: Finance ministry has agreed to Disinvestment Commission8217;s suggested mechanism to permit divestment in PSUs by transfer of shares to a national shareholding trust as an alternative to the special purpose vehicle route.

Disclosing this here on Wednesday at a meeting with the members of PHD Chamber of Commerce and Industry, Disinvestment Commission chairman G V Ramakrishna said setting up of the trust was important to draw up a comprehensive approach for PSU disinvestment. 8220;Instead of SPV route, the trust proposal which is actually a modified SPV, will come into effect and there is no difference of view with the finance ministry on this issue,8221; he said.

In the first round, the trust could transfer 15 to 20 per cent shares of blue chip PSUs with less than 70 per cent government holding to the financial institutions and banks at a discounted price.

They could offload holdings in the domestic market at appropriate time, preferably within six months to one year and share the profits withthe trust which in turn will be transferred back to the government.

Later, the remaining holding should be divested in favour of FIs at market prices while retaining 26 per cent with them, he said. The trust and FIs will need to work out a profit-sharing agreement on subsequent sale of shares.

8220;The loss-making PSUs should be closed down after providing adequate compensation to the work force, while there should be no disinvestment in strategic units with 100 per cent government ownership,8221; Ramakrishna said.

The trust should be incorporated under Section 25 of the Companies Act 1956. Its board could comprise chairmen of the Industrial Development Bank of India, the State Bank of India and the Life Insurance Corporation, besides Disinvestment Commission chairman, eminent management experts, the finance secretaries and chief executive officers of such PSUs, added divestment panel chief.

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8220;A speedy PSU disinvestment programme has to be addressed by the government on a priority basis as the initiativewould not only enhance enterprise value and maximise government capital receipts, but would also have an impact on the Indian economy by reviving the capital market,8221; he said.

Questioning the validity of needing foreign merchant bankers to sell shares in the domestic market, he said Indian merchant bankers should be encouraged to sell and their advice should be asked for from time to time. 8220;Foreign bankers should be involved only for GDRs,8221; felt Ramakrishna.