PSEs to remain PSUs even if govt. stake is less than 51%

PSEs to remain PSUs even if govt. stake is less than 51% The government is planning a major change in 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. As per the sources in Department of Public Enterprises the change in definition is being discussed with the Finance Ministry, and an announcement could be made by the new government. Under the present definition, CPSEs are companies in which the direct holding of the central government or other CPSEs is 51 per cent or more. 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. "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 government 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. 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. The government is already taking steps to reduce its stake in various PSUs. In the case of banks, the aim is to first reduce government shareholding to about 52 per cent, and then further down. In others, this exercise can be pursued rapidly. Market regulator SEBI also wants PSUs to increase public float to at least 25 per cent. The government has surpassed the FY19 disinvestment target of Rs 80,000 crore by Rs 5,000 crore. It has set a conservative target of Rs 90,000 from disinvestment in FY20. If the PSU definition is changed, it would be easier for the government to mobilise funds even in a choppy market as PSUs could be asked to buy back government shares. If markets are good, higher number of government shares in PSUs can be offered at a premium.