Strategic sale of units of CPSEs for which Cabinet approval is already in place will have to be executed by the respective state-owned companies in accordance with the guidelines to be laid down by DIPAM shortly, the finance ministry has said. However, those transactions for which Expression of Interest (EoI) have been issued will continue to be handled by the Department of Investment and Public Asset Management (DIPAM), it said.
DIPAM, in an office memorandum dated June 1, said that the strategic sale proposal of any CPSE (Central Public Sector Enterprise) unit which has been approved by the Cabinet Committee on Economic Affairs (CCEA) or Alternative Mechanism (AM) will be taken forward by the state-owned company in accordance with the new guidelines. The office memorandum follows the decision of the Cabinet on May 18, which empowered the boards of Public Sector Enterprises (PSEs) to decide on the closure, strategic or minority stake sale in units/subsidiaries, thereby giving more autonomy to state-owned companies.
In the office memorandum, the DIPAM said that the Cabinet had empowered the boards of holding/parent PSEs “to undertake transactions for disinvestments (both strategic disinvestment and minority stake sale)/closure of subsidiaries/units/ sale of stakes in JVs, including for such cases, where ‘in-principle’ approval by the CCEA/AM has been accorded”. Since 2016 the Cabinet has given in-principle approval for strategic disinvestment in 35 state-owned companies and/or their units or subsidiaries. Of them, 9 transactions have been completed.
Also, two units of SAIL — Salem Steel Plant, Bhadrawati Steel Plant; and NMDC’s Nagarnar Steel Plant are ongoing transactions for strategic sale. The DIPAM said that the process for undertaking the strategic disinvestment transactions/closure to be followed by the PSEs should be open, based on the principles of competitive bidding and consistent with the guiding principles to be laid down. For strategic disinvestment, such guiding principles will be laid down by DIPAM. For closure, DPE shall issue guiding principles.
It said the boards of the state-owned companies will be required to submit proposals for sale of its units or subsidiaries to DIPAM through administrative ministry. The alternative mechanism on disinvestment will accord ‘in principle’ approval for disinvestment (both strategic disinvestment and minority take sale)/closure of subsidiaries of Maharatna PSEs, which was delegated to them and review the process of disinvestment or closure by the parent or holding PSEs.
The AM comprises ministers of finance, road transport and highways, and the concerned minister of the administrative department of the PSE. So far, the board of directors of holding or parent public sector enterprises had powers to make decision on equity investments for setting up joint ventures and wholly-owned subsidiaries and undertaking mergers/acquisitions, subject to a net worth threshold.
However, the boards do not have powers for disinvestment or closure of their subsidiaries or units or stake in JVs, except for some limited powers given to Maharatna PSEs for minority stake disinvestment in their subsidiaries. Therefore, approval of the Cabinet was required for both strategic disinvestment and minority stake sale or closure of the subsidiaries or units or sale of their stakes in a JV, irrespective of the size of operations or capital deployed of such subsidiaries, etc.
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