Cabinet to consider proposal of buyback of governmentt equity by PSUs

NEW DELHI: The Cabinet is likely to give a go-ahead to the the Department of Disinvestment proposal for buyback of government equity by state-owned companies, a move that will help the Centre to meet its disinvestment target of Rs 40,000 crore in 2011-12.

"The buyback issue would be placed before the Cabinet Committee on Economic Affairs (CCEA) for appropriate decision," sources said.

The DoD has already sought the opinion of concerned ministries for buyback of shares and has prepared a list of cash-rich PSUs in this regard.

The government has been thinking of raising funds through the buyback route, as it has not been able to raise money through sale of equity in public sector units on account of uncertainty in stock markets.

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

According to the current regulations, market regulator Securities and Exchange Board of India (SEBI) allows companies to buy back their own equity from shareholders.

The Centre has set a target for raising Rs 40,000 crore through disinvestment this fiscal. But with nine months already over, it has been able to mop up only Rs 1,145 crore through the follow-up offer of Power Finance Corporation.

Given the volatility in the capital market in the backdrop of global and domestic economic situation, the government has not come out with any public offer to sell its stake in PSUs, barring PFC, this fiscal.