The finance ministry's plan to meet the disinvestment target through share buyback by state-run companies has run into a problem with power ministry saying that all six companies under its administration will not be able to participate in the process.
In a dissent note to the North Block, the power ministry has argued that all the state-run companies have big expansion plans to tackle the massive power shortage in the country, and therefore, won't be able to spare cash for the share buyback.
"They (power ministry) have argued that they are targeting a capacity addition of almost 100,000 MW during the 12th Five Year Plan (2012-17)," said a finance ministry official, requesting anonymity. "This would need huge investments, and PSUs under them have already committed funds for various projects," the official said.
The public sector enterprises under the administrative control of the power ministry are NTPC, Power Grid, NHPC, REC, PFC and NEEPCO.
According to estimates, the combined cash surplus with all these state-run firms is around Rs 50,000 crore, more than current year's fiscal disinvestment target of Rs 40,000 crore that the government is struggling to meet, having raised just Rs 1,145 crore so far.
The chairman of a state-run firm backed the power ministry's response, saying his company's cash surplus position paled in comparison to its massive investment requirements.
So far, only mines ministry and the department of public enterprises (DPE), a nodal agency for 246 state-run firms, have supported the cabinet note proposed by the finance ministry on share buyback.
But the DPE has also cautioned that companies should not be forced to buy back shares, suggesting that the option should be left to the respective boards.
"We have given our nod to the proposal but said that the buyback should be proportionate, and all guidelines of the market regulator Sebi should be followed," said an official with DPE.
The finance ministry has moved a cabinet proposal to give executive sanction to listed companies having surplus cash for buying back their shares.
The government is looking at various options, including cross-holding, share buyback, auction and special dividend to raise disinvestment proceeds. Finance minister Pranab Mukherjee has, however, said the government will stick to its disinvestment target of Rs 40,000 crore in this fiscal.