Govt may drop put and call options in disinvestment plan
Controversial call and put option that gives strategic partner an option to pick residual stakes in a company — a crucial clause of NDA regime — is likely to be dropped in disinvestment programme of the new UPA regime.
By Anto Antony, ET Bureau |
NEW DELHI: The controversial call and put option that gives the strategic partner an option to pick residual stakes in a company at a later stage ��� a crucial clause of the divestment plan under the NDA government ��� is likely to be dropped in the disinvestment programme of the new UPA regime.
With the new government readying itself to put some of the non-profitable public sector companies on the block, the finance ministry has proposed that call and put options should not be part of the sale agreements. While the government is not open to privatisation of profit-making PSUs, or those in strategic sectors, it is expected to bring in strategic partners in loss-making public sector enterprises to revive them.
Divestment of minority stakes in profitable companies, too, could be an option as long as the government continued to hold majority stake and management control. Senior cabinet minister Kamal Nath, who held the commerce portfolio in the earlier UPA regime, recently told ET: ���Divesting minority stakes do not mean giving up government control. It could improve efficiency.���
"The call option attached to the strategic sales has triggered many controversies and litigations. A recent meeting by committee of secretaries to look into the rights of Sterlite to exercise call option for buying the residual stake in Bharat Aluminium Company (Balco) has also suggested that the call option need not be a part of further stake sales. A policy decision on this lines can be expected," said a government official reflecting Centre's thinking on the issue.
After acquiring 51% stake in Balco for Rs 550 crore in 2001, Sterlite had approached the government in 2004, to exercise the call option, which was a part of sales agreement and to acquire the residual stake in Balco. But Comptroller and Auditor General's report pegged the value of the residual share much higher than what Sterlite had offered following which Sterlite moved the Delhi High Court in 2006. The issue is yet to be sorted out.
Out of 217 operating public sector enterprises, close to 152 are profitable. Even among these PSUs, whose balance sheets are in the black, more than half could not roll out pay hikes suggested by PSU pay revision committee.
"The pay revision committee had suggested that not only the loss making public sector enterprises, but also those companies in which profits are below Rs 50 crore should be considered for divestment. Strategic sales in these companies will be resorted to, if blue-chip public sector enterprises in the same sectors do not want to take these loss making companies into their fold," said a government official.
The list of companies, where privatisation is expected in near future, includes Indian Drugs and Pharmaceuticals, Hindustan Machine Tools, Hindustan Photo Films, Konkan Railway Corporation, and a cluster of fertiliser companies among others.
With the new government readying itself to put some of the non-profitable public sector companies on the block, the finance ministry has proposed that call and put options should not be part of the sale agreements. While the government is not open to privatisation of profit-making PSUs, or those in strategic sectors, it is expected to bring in strategic partners in loss-making public sector enterprises to revive them.
Divestment of minority stakes in profitable companies, too, could be an option as long as the government continued to hold majority stake and management control. Senior cabinet minister Kamal Nath, who held the commerce portfolio in the earlier UPA regime, recently told ET: ���Divesting minority stakes do not mean giving up government control. It could improve efficiency.���
"The call option attached to the strategic sales has triggered many controversies and litigations. A recent meeting by committee of secretaries to look into the rights of Sterlite to exercise call option for buying the residual stake in Bharat Aluminium Company (Balco) has also suggested that the call option need not be a part of further stake sales. A policy decision on this lines can be expected," said a government official reflecting Centre's thinking on the issue.
After acquiring 51% stake in Balco for Rs 550 crore in 2001, Sterlite had approached the government in 2004, to exercise the call option, which was a part of sales agreement and to acquire the residual stake in Balco. But Comptroller and Auditor General's report pegged the value of the residual share much higher than what Sterlite had offered following which Sterlite moved the Delhi High Court in 2006. The issue is yet to be sorted out.
Out of 217 operating public sector enterprises, close to 152 are profitable. Even among these PSUs, whose balance sheets are in the black, more than half could not roll out pay hikes suggested by PSU pay revision committee.
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"The pay revision committee had suggested that not only the loss making public sector enterprises, but also those companies in which profits are below Rs 50 crore should be considered for divestment. Strategic sales in these companies will be resorted to, if blue-chip public sector enterprises in the same sectors do not want to take these loss making companies into their fold," said a government official.
The list of companies, where privatisation is expected in near future, includes Indian Drugs and Pharmaceuticals, Hindustan Machine Tools, Hindustan Photo Films, Konkan Railway Corporation, and a cluster of fertiliser companies among others.
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