New Delhi: Government's disinvestment programme remained on papers with only one public sector undertaking (PSU) hitting the capital market raising only Rs 1,145 crore in 2011, as against the target of mopping up Rs 40,000 crore during the current fiscal.

During the year, proposals were mooted for disinvestment of several companies, including BHEL, ONGC and SAIL, but none of them saw the light of the day.

Volatility in the capital markets, mainly driven by global factors, forced the government to repeatedly postpone the public issues by PSUs. In certain cases, the PSUs could not come out with the public offerings because of delay in appointment of independent directors by the government.

The department of disinvestment (DoD), which has been mandated to raise Rs 40,000 crore, had to think of innovative ways, like buyback of shares by cash rich PSUs to achieve the mammoth target for the current fiscal.

In May, the DoD came out with follow on public offer (FPO) of Power Finance Corporation (PFC), the only PSU issue which hit the capital market.

The PFC FPO opened on May 10 and closed on May 13 and the issue was subscribed 4.32 times. The company, in which the government diluted 10 per cent stake, gave Rs 1,145 crore to the exchequer.

The stake dilution was part of concerted efforts to raise funds to boost government finances.

Anticipating Rs 40,000 crore fund mop up through disinvestment, the government had fixed a fiscal deficit target of 4.6 per cent in the current fiscal.

However, with disinvestment target unlikely to be met, the fiscal deficit could exceed the budget estimates. 

Besides bluechip companies like BHEL, ONGC and SAIL, the government had also identified Hindustan Copper (HCL), Rashtriya Ispat Nigam Ltd (RINL), National Buildings Construction Corporation (NBCC) and Hindustan Aeronautics (HAL) for disinvestment in the current fiscal.

However, the stake sale had to be put off because of the impact of decline in global markets on Indian bourses. The Indian equity markets benchmark BSE Sensex declined 25 percent so far in 2011 falling to 15,379.34 points. It was quoting at 20,509 points on December 31, 2010.

Besides, the draft paper for ONGC FPO filed with Sebi was withdrawn for the lack of adequate number of independent directors. The government plans to offload 5 per cent stake that would fetch it around Rs 12,000 crore, nearly one-third of the budgeted target.

Besides, plans are on to offload 5 per cent equity in power equipment maker BHEL, which would fetch over Rs 4,000 crore and draft papers for which have been filed with the market regulator Sebi. In view of uncertain market conditions, companies like SAIL and Hindustan Copper (HCL) have deferred fresh equity issue, though the government will go ahead with its proposal to offload stake.

Besides, SAIL FPO has failed to meet deadlines repeatedly since December 2010, due to several reasons, like rising coking coal prices, problems with merchant bankers and adverse
market conditions.

The DoD is believed to have identified two dozen cash rich PSUs having a total balance of nearly Rs 2 lakh crore for buying back shares.

The companies which have been identified by the government for buyback include SAIL, NMDC, ONGC, NTPC, Coal India, Oil India, MMTC, Neyveli Lignite, NHPC, BHEL and GAIL.

Such companies may be asked to buy back about 5 percent equity from the shareholders. Under the current regulations, market regulator Sebi allows companies to buy back their own equity from shareholders.

Under the buyback mode, the government can raise money by selling its equity in the company to the concerned PSU itself.

In 2010, the government had raised a record Rs 40,000 crore in nine state-owned companies including Coal India, NMDC, NTPC and Rural Electrification Corporation (REC).

The amount was the most raised in a year since the government began the programme of diluting minority stake or privatising vast swathes of public sector companies in 1991-92.