Many ‘maharatna’ and ‘navratna’ cos may lose PSU tag post equity dilution

By Subhash Narayan

New Delhi, July 11 (IANS) Several of 'maharatna' and 'navratna' companies, including ONGC, IOC, GAIL and NTPC, could soon become independent board-run entities outside the scrutiny of CAG and CVC if the government implements a proposal to take out the PSU tag from some of the entities after its shareholding falls below the threshold 51 per cent mark.

Government sources said that Finance Ministry is planning to approach NITI Aayog to prepare yet another list of PSUs where their holding could be brought down to below 51 per cent and also point out which of these could shed the PSU tag and become independently board-run private companies.

For a company to remain a government-controlled public sector undertaking (PSU), either the Centre or the state government or both together should hold more than 51 per cent stake in it. The Budget proposed that 51 per cent stake could include direct and indirect shareholding of the government through other state-run companies and financial institutions.

"As per the definition of a government company, the Central government and the state government together have to have 51 per cent equity. If that comes down, then it does not have the character of the government company. So when this decision is taken, we will also be consciously deciding whether that particular company needs to be retained with the tag of the government company," Finance Secretary Subhash Chandra Garg told IANS when asked about the government's plan on privatization.

Though Garg did not elaborate, sources said three categories of companies would be retained by the government: one where government and its institutions hold 51 per cent or more, second where government stake is below 51 per cent but the company still retains PSU tag with a change in law and third; where companies become almost private entities with government holding of say, 26 or 40 per cent, and being run by a board.

It is the third set of companies where several professionally run 'maharatna' and 'navratna' PSUs would fall. Government intends to offer complete freedom to some of these entities to run their operations while also keeping the entities outside the scrutiny of CVC and CAG.

At present there are more than two dozen CPSEs that are widely held by the public with government stake of less than or close to 60 per cent. These include 'maharatna' and 'navratna' CPSEs like Engineers India Ltd (EIL-52%), Indian Oil Corporation (IOC-52.18%), Bharat Petroleum Corporation (BPCL-53.29), Gail India (52.64%), Oil and Natural Gas Corporation (ONGC-64.25%), Power Finance Corporation (PFC-59.05%), Powergrid Corporation (PGCIL-55.37%), NTPC, Shipping Corporation of India (SCI-63.75%), Bharat Heavy Electricals (BHEL-63.17%), NBCC (68.18%), Container Corporation (Concor a" 54.80%).

Some of these may be earlier targets for bringing down equity below 51 per cent level. If government sells more of its equity in these entities, it could also raise its disinvestment proceeds easily from the market without looking at other instruments such as share buyback, new issues of ETFs or higher dividend payout from PSUs including declaration of special dividend.

This would also eliminate pressure on achieving disinvestment target, as even a small issue by a bluechip PSU can get better realisation for government shares. The shares of most of these companies have got good valuation from the market. The government has set a disinvestment target of Rs 1,05,00000 crore for FY20.

(Subhash Narayan can be contacted at subhash.n@ians.in)