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PSEs To Stay PSUs Even With Below 51% Government Stake

PSEs To Stay PSUs Even With Below 51% Government Stake

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  10 April 2019 11:07 AM GMT

New Delhi: The government is planning a major overhaul of the definition of state-run companies where an entity will continue to qualify as public sector enterprise (PSE) even if the government holding falls below 51 per cent.

Sources in the Department of Public Enterprises said the change in definition is being discussed with the Finance Ministry, and an announcement could be made by the new government. “There is a thinking that PSU definition should be maintained with government holding of, say, 40 per cent or 26 per cent in case of certain non-strategic entities. This will not only give flexibility to PSU boards in decision-making but also allow more room for the Centre to raise additional revenue from disinvestment,” said a top PSE official aware of the proposed changes.

Under the present definition, CPSEs are companies in which the direct holding of the central govt or other CPSEs is 51 per cent or more. It can be brought down to, say, 40 per cent. It will still allow the Centre to be the largest shareholder especially in companies like NTPC, Powergrid, BHEL, where public shareholding is already very high. The changes will also facilitate consolidation among PSUs in different sectors.

For example, the Power Finance Corporation (PFC) that has bought entire government equity in REC, now wants to merge the entity with itself. But this will bring down government shareholding in the merged entity to just about 42-43 per cent, taking the company outside the PSU-fold. If the threshold of the government holding is lowered, such consolidation will be promoted without companies fearing to lose their PSU character.

“This would be wonderful change that will allow PSU boards to be widely represented. The fear of a possible hostile takeover of companies with reduced government equity is also unfounded as the govt with 40 per cent will still have substantial stake that can also rise if state/owned institutions, like LIC, also hold a sizeable share,” said an industry expert. (IANS)

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