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Ban on PSU bids: PMO note prompted CCD decision

Gaurav Raghuvanshi & Mamata Singh in New Delhi

A note prepared by the Prime Minister's Office, questioning the divestment ministry's proposal for a blanket ban on public sector units bidding for other government-owned companies, was instrumental in the Cabinet Committee on Divestment's decision to take the bids on merit basis.

According to the note, the PMO had said a decision on whether to keep PSUs out of the divestment process involved "deeper conceptual issues" that deserved merit. After a meeting of the core group of secretaries, the PMO had prepared a note for the Cabinet secretary recommending against a blanket ban, a senior government official said.

The divestment ministry had been insisting on a complete ban on government-owned companies and co-operative societies with more than 51 per cent government holding from participating in the selloff process, saying there was little logic in allowing PSUs to consolidate to sell the merged entity later on.

State-owned companies bidding for fellow PSUs could also be seen by international investors as a government ploy to retain control, and might not be considered to be privatisation, the divestment ministry had said.

The ministry of petroleum and natural gas, on the other hand, had said there should be no such ban because it could lead to less competition in the divestment process, and drive down the valuation of PSUs on the block.

The petroleum ministry is keen on government-owned Oil and Natural Gas Corporation acquiring one of the two downstream companies-Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd-as part of its efforts to become an integrated oil company.

Following the PMO intervention, the CCD decided PSUs should be kept out of the divestment programme under normal circumstances. However, in special cases, deviation from the policy could be considered in public interest.

The administrative ministry would be required to bring a special proposal before the CCD in such cases.

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