Indian Govt to divest equity & list profit making CPSUs
November 13, 2009:
Indian Government has approved an action plan for disinvesting Government equity in profit making CPSUs i.e. already listed profitable CPSUs, not meeting the mandatory public shareholding of 10%, to be made compliant and list all profit making CPSUs, through Public Offerings, out of Government shareholding or issue of Fresh Equity by the company or in conjunction.
The Department of Disinvestment will begin Inter-Ministerial consultations to identify CPSUs for disinvestment. As each CPSU has different capital structures, financial strength and differing status in compliance with mandatory listing requirements, each disinvestment will be considered on a case-by-case basis for approval by Government.
In view of the deceleration of GDP growth due to global economic downturn coupled with unprecedented drought this summer, we are facing a reduced budgetary resource generation possibility. To ensure that this does not negatively impact the growth of economy; Government has approved one-time exemption permitting full utilization of disinvestment proceeds deposited in the National Investment Fund, over this and the next two Financial Years, in meeting the capital expenditure requirements of selected social sector programmes decided by the Planning Commission/Department of Expenditure. The status quo ante will be restored from April 2012.
According to Secretary, Disinvestment Shri Sunil Mitra, the unlocking of the dormant wealth of our CPSUs and their channelization for capital expenditure in social sector schemes, will stimulate economic growth with benefits percolating to the masses.
Benefits of Listing CPSUs:
Availability of good quality PSU shares for trading provides depth and liquidity to market that has a stabilizing influence.
Direct “people ownership” effectively enables public to share the prosperity of CPSUs.
Indirect “people ownership” is achieved through Mutual Funds and Insurance Companies’ participation in Public Offerings.
The value of Government’s residual shareholding in such CPSUs increases substantially.
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