Millennium Post

FinMin tells cash-rich PSUs to buy equity in other govt cos

The Finance Ministry has asked cash rich PSUs like Coal India Ltd (CIL), Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) to consider buying government equity in other state-run firms to help achieve the Rs 40,000 crore disinvestment target in the current fiscal (2013-14).

‘We have written to all cash rich PSUs enquiring about their cash balance and capex plans. We have told them if they do not have sufficient capex plans they should buy back government share or pay higher dividend,’ said a top government official.

The share sale of Coal India Ltd is the biggest disinvestment proposal for the government in the 2013-14 fiscal. The government plans to raise about Rs 17,000 crore through the stake sale.

The proposed 10 per cent Coal India Ltd stake sale may be split into Offer for Sale (OFS) and government equity buy-back by the company, the official said. He further said in all such companies in which a buy-back can happen, the disinvestment through Offer for Sale would come first followed by a share buy-back.

‘Merchant bankers have suggested that buyback be done post Offer for Sale as share buyback usually happens at a premium,’ the official added. The government plans to raise Rs 40,000 crore by way of disinvestment in the current fiscal and has already identified a host of companies for the same.

India’s 17 major public sector entities including Coal India Ltd, Oil and Natural Gas Corporation, NMDC and Oil India Ltd had over Rs 1.62 lakh crore in cash reserves during 2012-13.

Among these central public sector enterprises (CPSEs), Coal India Ltd had the maximum cash and bank balance at Rs 43,776 crore, followed by Oil and Natural Gas Corporation (Rs 22,450 crore), NMDC (Rs 17,230 crore) and NTPC (Rs 16,185 crore).

The cash and bank balance of Oil India Ltd were at Rs 11,770 crore, SAIL at Rs 13,207 crore and that of Indian Oil Corporation Ltd (IOCL) at Rs 1,290 crore.

The central public sector enterprises usually use their funds for commercial purposes including capital expenditure and expansion, payment of dividend and tax, discharge of liabilities and working capital.

Among these, a host of central public sector undertakings, including Coal India Ltd, Indian Oil Corporation Ltd and SAIL, are in the government radar for disinvestment.

Under the buyback mode, the government can raise money by selling its equity in the company
to the public sector undertaking itself.

The government had last year included various options including buyback of shares to prune its stake in state-run firms. No funds have been raised through the route so far.


The inter-ministerial panel constituted to give recommendations on setting up of an independent regulatory authority for the coal sector is expected to meet next week. ‘The meeting of the Group of Ministers (GoM) is on May 29,’ a government official said.

The Law Ministry has already redrafted some sections of the Coal Regulatory Authority Bill and the GoM may take it up for formal approval during the meeting, the official added. Settling the issue of fixing coal prices, the GoM had earlier this month decided that the proposed regulator will not determine fuel rates, a job that will continue to be vested with the producers. The regulator will be, however, empowered to resolve disputes including those arising out of fuel supply agreements (FSAs).

‘There is an agreement that pricing must be left to the producer of coal but the regulator will have power to adjudicate on disputes relating to price, quality, supplies. All disputes will be adjudicated with the regulator and then there will be an appellate authority,’ Finance Minister P Chidambaram had said after the meeting of the GoM.

Chidambaram, who heads the GoM, had said an agreement has been arrived upon on the contents of the Coal Regulatory Authority Bill to set up the regulator and the Law Ministry has been asked to redraft some sections of the Bill. The proposal for setting up an independent regulatory authority for coal sector was submitted for consideration of the Cabinet, which referred it to the GoM.

Coal Minister Sriprakash Jaiswal had also said the proposal was in final stages. An independent regulator for the sector is considered important for fixing guidelines for price revision, improving competitiveness in the e-auctions, setting trading margins and increasing transparency in the allocation of reserves.The GoM includes Environment Minister Jayanthi Natarajan and Planning Commission Deputy Chairman Montek Singh Ahluwalia and Coal Minister Sriprakash Jaiswal.              
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