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Govt drops share warehouse plan

Gaurav Raghuvanshi in New Delhi

The government has dropped the idea of setting up an asset management company to warehouse the shares of divestment-bound public sector companies before their selloff.

"We have realised that transferring the entire PSU stock to a new company will lead to a lot of confusion on who will have administrative control on the company. Any outside agency will not be competent enough to take day-to-day decisions for the divestment-bound company," a senior government official told Business Standard.

Later, it was proposed to transfer the residual equity of companies divested to the asset management company, which, too, had been shot down, the official said. There was no need for a separate entity for the purpose, he added.

"Any of the existing financial institutions, like the Unit Trust of India or the Industrial Development Bank of India, can be entrusted with the responsibility of warehousing the residual equity. With no clear role identified for the asset management company, we have decided to drop the idea," the official said.

Even the divestment ministry, in its comments on the proposal moved by the finance ministry, had questioned the need for a separate company to hold government shares of the 250-odd public sector companies.

The divestment ministry had also sought clarification on the role of the proposed company vis-a-vis the administrative ministry for the concerned public sector undertaking.

It had pointed out that it might not be practical for the ministry to retain day-to-day control in the PSU while decisions regarding the sale of its equity were being taken elsewhere.

Finally, the divestment ministry also wanted to know under which ministry's control would the proposed company function.

The divestment ministry is the nodal agency for taking up cases for divestment at the Cabinet Committee on Divestment and also for deciding on the residual equity in companies where strategic sale has been completed.

The proposal for the company was mooted by Finance Minister Jaswant Singh at the July 11 Cabinet Committee on Divestment meeting.

The finance ministry was asked to prepare a blueprint for the proposed entity with inputs from the divestment ministry.

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