Despite concerns raised by state-owned firms about depleting their investible surpluses at a time when the economy is showing signs of a slowdown,the government is clearly leaving no stone unturned in its attempt to squeeze cash out of these firms to bridge the fiscal deficit.
The department of public enterprises (DPE) has now strongly nudged all state-owned firms to consider buying back their shares from the government,a move that is aimed at boosting disinvestment receipts in 2012-13.
It has been noticed that listed central public sector enterprises (CPSEs) are not exercising the option to buyback their shares as private companies do,to provide for sustained investor interest in the company and protect their market capitalisation in the long-term…, the DPE said in a missive to secretaries of all administrative ministries and chief executive officers of all public sector firms.
Ironically,the DPEs prodding comes after the finance ministry claimed that it would be left to state-owned firms to take a final call on buyback option.
We will not push PSUs to go in for buyback of shares. It will be entirely their decision and they will have to approach us with such a proposal, an official with the department of disinvestment (DoD) had recently told The Indian Express.
The DPE has also asked all PSUs to issue guidelines for buyback as this will provide a level- playing field to CPSEs vis-vis private companies.
In case a CPSE chooses to buy back its shares with surplus cash,the department of disinvestment will help facilitate this by offering the required equity,the missive said.
The DPE has also directed all PSUs to amend their Articles of Association to provide for buyback in case such a provision does not exist. It has also asked all nodal ministries to ensure that their PSUs implement these measures and submit a Compliance Report on it.
The Cabinet Committee on Economic Affairs (CCEA) on March 1 had cleared an extended strategy of the department of disinvestment that would allow PSUs to buyback shares from the government. Though the government has identified eight cash-rich PSUs such as Coal India Ltd that have a combined surplus of Rs 55,580 crore to exercise the buyback option,the DPE circular will ensure that all state-run firms actively consider this option.
Meeting the target from stake sales is crucial for the government,which is hoping to control its fiscal deficit at 5.1 per cent of the GDP in 2012-13. For the next fiscal,the government is hoping to earn a modest Rs 30,000 crore from disinvestment proceeds,after two failed attempts at garnering Rs 40,000 crore from the exercise.
In 2011-12,sell off proceeds are likely to fetch Rs 14,000 crore while in 2010-11,about Rs 23,000 crore was raised from disinvestment in PSUs.