Divestment: PSU cross-holding ‘wrong’https://indianexpress.com/article/news-archive/web/divestment-psu-crossholding-wrong/

Divestment: PSU cross-holding ‘wrong’

The PMEAC opposes proposal of one PSU buying shares of others to help govt raise funds.

Expressing its opposition to the proposal of one PSU buying shares of others to help government raise funds,the PMEAC today said it was not desirable as it would reduce investible resources of the buying company.

“The proposal that was mooted to raise this (Rs 40,000 crore disinvestment) revenue by divesting the shares of public enterprises to other cash rich public enterprises was not a desirable option,” Prime Minister’s economic advisory council (PMEAC) Chairman C Rangarajan said.

Unable to raise funds through sale of equity in public sector undertakings (PSUs) because of volatile market conditions,the finance ministry had mooted innovative ways,including cross holding by PSUs,to achieve Rs 40,000 crore target.

“This would have only reduced the investible resources of the enterprises and failed to convince market participants “who in any case mark down the reported deficits by all exceptional items,i.e. one-off items such as divestment proceeds and other asset sales,including spectrum auctions,” the review of the economy 2011-12 report by PMEAC said.


Under the cross-holding route,shares of a PSU was to be sold to other cash-rich firms of the government.

The receipt through disinvestment has totaled only Rs 1,145 crore this fiscal against the target of Rs 40,000 due to volatile market conditions.

The government is presently working out modalities for 5 per cent stake auctioning in ONGC that would fetch the exchequer around Rs 12,000 crore.