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Finance minister P Chidambaram recently said that Bharat Heavy Electricals (BHEL) and Coal India (CIL) have been asked to come back with alternative options like buybacks and special dividends given their stake sales have hit roadblocks. But even these don’t seem easy options given the way the public sector undertakings concerned are likely to react to North Block’s missives.
A BHEL official said on condition of anonymity that the company’s board meeting last week did not discuss the special dividend option, adding that the cash reserve position of the firm (about R6,000 crore) is not robust enough to allow a handsome payout to the promoter at this juncture.
What has added to the finance ministry’s woes is oil minister M Veerappa Moily’s statement opposing a 10% stake sale in Indian Oil Corporation, given that its stock has nearly halved since 2010, when the divestment was first proposed.
The issue was scheduled to hit the market in December but Moily now wants the share to recover before it is pushed though. The roadshows for the issue in Hong Kong, Singapore and the US have drawn lukewarm response, while the one planned in Dubai was cancelled.
With the Rs 40,000-crore disinvestment target for FY14 looking ambitious, the government had set in motion a plan to milk some of the major PSUs including CIL and BHEL, whose stake sale plans had hit a hurdle, through the dividend route. The coal PSU’s board is meeting on Monday in Kolkata and according to sources the demand from the government for a special divided is not the agenda, although it could be discussed “informally”.
Meanwhile, the finance ministry has prepared a draft Cabinet note saying that Hindustan Zinc cannot be classified as a PSU and that parliamentary approval is not needed to offload the government’s residual stake in the firm. The government’s tax revenue growth is lagging — gross direct tax receipts grew 13.2% in April-November against the 18% budgeted for FY14 and indirect tax collections in the first half grew 3.5% compared with the 19% budgeted.
Given this and the fact that beyond a limit it can’t fiddle with expenditure numbers, the government can’t allow a slippage in the non-tax revenue and hence the attempts to boost proceeds through options other than disinvestment.
Sources also said that a buyback is more palatable to CIL trade unions. This, along with a special dividend, is expected to allow