Naturally, the Union Finance Ministry is banking on implementation of its earlier stipulation on the minimum public holding in listed companies for the government stake sale in PSUs without requiring any fresh approval of the Union Cabinet for such share disinvestments which may require consensus among the partners of the United Progressive Alliance (UPA). The Finance Ministry proposed the application of the new listing norm as early as in February last year. However, it did not proceed with the idea probably because of the stock market crash just a year ago.

If the government so wishes, it can easily mop up, up to Rs. 30,000 crore through such stake sale in a portion of the listed PSUs this year. But, the authorities do not seem to be in a hurry to do so. The first phase of PSU disinvestment under this stipulation may take place towards the end of the year, depending on a number of factors, including economic growth and market stability as well as the clear definition of 'public holding' which is being debated. Since most listed PSUs will attract the proposed norm, the government may like to implement the new rule in stages, offering its stock-sale in five to six large corporations per year to secure the best price and valuation.

For now, as it has been stated in Parliament, the government will be happy to initiate a small stake sale in two of its profit-making corporations, Oil India and National Hydroelectric Power Corporation. The combined stock-sale target in these two PSUs is only Rs. 1,854 crore as per the valuation of their stocks. But, the move will pave the way for a larger stake sale in the two PSUs in due course to comply with the minimum public shareholding norm when it comes into force. This is certainly a test case. The government may use the model to convert several of those 100 per cent state-owned PSUs into stock exchange listed companies first and then go for bigger stake sale in keeping with the proposed minimum public shareholding norm. Some of the PSUs such as the Minerals and Metals Trading Corporation and National Mineral Development Corporation have public shareholding as low as 0.67 per cent and 1.62 per cent, respectively.

However, the PSU disinvestment using the proposed minimum public share-holding norm as a shelter is easier said than done. Already, a big controversy has erupted over the definition of public share-holding, which presently includes those held by domestic and foreign financial institutions under 'portfolio holding', mutual funds and non-resident Indians. The Finance Ministry is against such all-inclusive definition of public holding having little connect with 'floating stocks' of a company in the market. The Ministry does not want concentration of shares of public companies in a few hands of bulk investors to prevent market volatility. Strictly speaking, portfolio investments and bulk investments, including inter-corporate investments, can't be branded as 'public investments' and put inside the same bracket with individual investors, employee share-holders and others. The Ministry wants to amend the existing norm to redefine public investment to make it more broad-based keeping the institutional and corporate investors out of the purview of the new definition.

The Finance Ministry is also said to be against the existing sectoral discrimination with regard to the maximum promoters' holding in a listed company. This means the new rule may take away the special exemption accorded by SEBI to companies in the sectors such as information technology, telecommunications, entertainment and infrastructure where the promoters can hold up to 90 per cent in a listed firm. The abolition of the discriminatory benefit to these special category promoters will force the latter to reduce their holdings to 75 per cent or below, depending on the final definition of 'public holding.' While this is good news for the ordinary investors and the market, it may not be all that palatable to industry barons. However, such a uniform rule for a minimum public share-holding in listed companies will further strengthen the government's position with regard to its future disinvestment plans in PSUs.

Whatever it is, the government stake sale in PSUs is certainly on. It is only a matter of time and opportunity as also the fixation of a proper procedure that will see the government ultimately unlocking the value of its investment in giant and successful PSUs to raise large funds to ensure fiscal stability and better performance of such undertakings in future. Planned properly, the disinvestment in such PSUs even up to 25 to 40 per cent over the next five to seven years can help the government raise additional resources up to a few trillion rupees. While such an exercise will not necessarily diminish the government's control over its well-performing PSUs, the measure will allow the administration to take up more social programmes to benefit the underprivileged and the old. Simultaneously, the good assets of terminally sick public undertakings should be sold after writing-off their liabilities without delay. Any PSU disinvestment programme to be successful must accompany a PSU management reform programme that will make the PSU executive management team more efficient, independent and transparent. By summoning the requisite will, the government can make it happen. (IPA Service)