Cabinet empowers PSU boards to divest, close units

In a bid to speed up the disinvestment process of public sector enterprises (PSEs), the Cabinet on Wednesday empowered the respective PSE boards to take a call on selling stakes in joint ventures and subsidiary firms, as well as the closure of units.

The mandate of the ministerial panel entrusted with approving disinvestment decisions has also been tweaked in accordance with the new norms to grant ‘in principle’ approval for sale of minority as well as strategic stakes in units owned by Maharatna PSEs.

“The process for undertaking the strategic disinvestment transactions, closures 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,” the government said in a statement.

The principles for strategic disinvestment would be laid down by the Department of Investment and Public Asset Management in the Finance Ministry while norms for closure cases would be laid down by the Department of Public Enterprises.

“In line with the spirit of the new PSE policy, 2021, to minimise presence of Government PSEs and for functional requirement, further delegation in this matter have been provided through this decision,” it said. This would enable firms to monetise their investments at an opportune time or close loss-making and inefficient ventures at the right time, and save wasteful operational financial expenditure, it added.

Currently, the board of directors of holding and parent PSEs have been delegated certain powers under the Maharatna, Navratna and Miniratna categories to make equity investments to establish financial joint ventures and wholly owned subsidiaries and undertake mergers subject to certain net-worth ceilings. But they do not have powers for disinvestment and closure of their subsidiaries or offloading stakes in joint ventures.

Lalit Kumar, partner at consulting law firm J Sagar Associates, termed the step as a ‘positive move’ that would bestow greater decision-making power to PSE boards. “At the same time, checks and balances have been ensured [so] that such autonomy is not unregulated,” he added. 

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Printable version | May 18, 2022 7:47:03 pm |