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May 24, 2001
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Money > Business Headlines > Report May 24, 2001 |
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Govt eyes Rs 280 billion PSU reservesMamata Singh The government should not find it difficult to meet its divestment target of Rs 120 billion this fiscal. Given the level of reserves in the public sector companies slated for sale, it should be able to finally meet its annual target after consistently missing out through the last decade. In 1999-2000, the reserves in the companies put up for divestment totalled over Rs 240 billion. Adding the reserves for Steel Authority of India Ltd and Shipping Corporation of India, which the department of divestment plans to take up this year, the figure goes up to almost Rs 280 billion. Of this, the government's share of the reserves and surpluses in these 44 companies (on the basis of the paid-up capital) comes to approximately Rs 196 billion. About 71 per cent, or Rs 140 billion will come from the six big companies-Mahanagar Telephone Nigam Ltd, Videsh Sanchar Nigam Ltd, National Aluminium Company, Indian Petrochemicals Corporation, SCI and SAIL. The Centre has already adopted a policy of withdrawing reserves from PSEs before divesting its stake in them. In the case of Bharat Aluminium Company, the government had undertaken "capital restructuring" of the company before its sale. In March 2000, the government removed Rs 2.44 billion of the total Rs 4.60 billion reserves with the company, reducing the equity base by 50 per cent. In the case of VSNL also, the government is considering a one-time dividend payment to the shareholders, which would use up a major portion of the approximately Rs 40 billion cash surplus with the company. The rationale put forward is that there is no point in handing over the reserves to the strategic buyer as it would mean handing over cash, for which the buyer would have to make a corresponding payment to the government. In most cases, therefore, the government plans to reduce equity or make dividend payments so as to benefit the existing shareholders, rather than keeping cash with the companies. Powered by YOU MAY ALSO WANT TO READ:
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