Centre likely to consider proposal to reduce stake below 51% in CPSEs soon; Cabinet may decide on merger of state-run insurance firms

The Budget for 2018-19 had proposed the merger of three public sector general insurance companies and subsequent listing of the merged entity on stock exchanges.

Press Trust of India November 19, 2019 18:54:28 IST
Centre likely to consider proposal to reduce stake below 51% in CPSEs soon; Cabinet may decide on merger of state-run insurance firms
  • Last week, Finance Minister Nirmala Sitharaman said the government would move forward on the merger of the three state-owned general insurance companies

  • The govt envisages that it can bring down its stake in a public sector undertaking by roping in other state-owned entities to retain the public sector nature

  • The govt hiked the disinvestment target to Rs 1.05 lakh crore this fiscal, up from Rs 90,000 crore projected in Interim Budget

New Delhi: The Union Cabinet will soon consider a proposal to bring down government stake in central public sector enterprises (CPSEs) to below 51 percent even while retaining the state control, sources said.

Besides, the Cabinet headed by Prime Minister Narendra Modi is likely to take a call on the merger of public sector general insurance companies.

The Budget for 2018-19 had proposed the merger of three public sector general insurance companies and subsequent listing of the merged entity on stock exchanges.

Centre likely to consider proposal to reduce stake below 51 in CPSEs soon Cabinet may decide on merger of staterun insurance firms

Representational image. Reuters.

Last week, Finance Minister Nirmala Sitharaman said the government would move forward on the merger of the three state-owned general insurance companies — National Insurance Company, United India Insurance and Oriental Insurance Company — as announced in the previous Budget.

In her Budget speech of 2019-20, Sitharaman had announced the government has been following the policy of disinvestment in non-financial public sector undertakings maintaining the government's stake not to go below 51 percent.

"The government is considering, in case where the undertaking is still to be retained in government control, to go below 51 percent to an appropriate level on a case-to-case basis. The government has also decided to modify the present policy of retaining 51 percent government stake to retaining 51 percent stake inclusive of the stake of the government-controlled institutions," she had said.

Such a move is possible by an amendment to Section 241 of the Companies Act.

Sources said the government envisages that the government can bring down its stake in a public sector undertaking by roping in other state-owned entities to retain the public sector nature.

For example, the sources said, if LIC picks up stake which lowers the government holding below the threshold level of 51 percent, the companies still are majority controlled by the government.

The government had hiked the disinvestment target to Rs 1.05 lakh crore in the current financial year, up from Rs 90,000 crore projected in Interim Budget 2019-20 in February.

In 2018-19, the government raised Rs 84,972 crore from CPSE disinvestment, while in 2017-18, the figure was Rs 1,00,056 crore.

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