In a major disinvestment initiative, the Union Cabinet on Tuesday gave its approval to disinvestment of 10 per cent each in Coal India Ltd. (CIL) and Hindustan Copper Ltd. (HCL), giving a big push to its agenda to raise Rs.40,000 crore through big ticket disinvestment this fiscal.

The move, likely to generate about Rs.16,000 crore, was approved by the Cabinet Committee on Economic Affairs headed by Prime Minister Manmohan Singh.

In CIL, the government will offload 10 per cent of its equity through an initial public offering. HCL will issue fresh shares equivalent to 10 per cent of the pre-issue paid-up capital along with the government selling 10 per cent of its stake in the firm through a follow-on-public offer.

Briefing newsmen, Home Minister P. Chidambaram said the share sale, which gives 5 per cent discount to the employees of both PSUs, was likely to happen within six months. “Disinvestment of CIL would be through the book-building process in the domestic market. One per cent of the equity will be offered to the employees of CIL and its eight subsidiaries,'' he added.

The government holds 100 per cent equity in the coal major, which has a total paid-up capital Rs.6,316.36 crore. Its holding will be reduced to 90 per cent through disinvestment of 63.16 crore shares. “The CCEA has also decided to allow 5 per cent price concession to retail investors to encourage greater public ownership of the public sector company,'' Mr. Chidambaram said.

CIL is the world's largest coal producer with an output of 431.5 million tonnes last fiscal. It accounts for over 85 per cent of India's total coal production of 531.5 million tonnes.

HCL's follow-on-offer will see the firm issuing fresh shares aggregating up to 9.25 crore shares of the face value of Rs.5 each, with the government selling a similar quantum of shares. HCL plans to raise copper ore production from 3.15 million tonne to 12 million tonnes annually.

The Cabinet Committee approval came without any opposition from within as Railway Minister Mamata Banerjee was absent at the meeting. Sources said Ms. Banerjee, who had been opposing disinvestment of public sector units, did not want to be seen as a party to a decision, which could draw criticism from the Left parties.

More In: Business | Companies