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Cabinet clears IBP, STC, MMTC, BBL sell-off

Onkar Singh and Tara Shankar Sahay in New Delhi

The Union cabinet on Friday gave the Department of Divestment the clearance for divestment in four major government-run organisations: IBP, STC, MMTC, and Bharat Brakes Limited.

Union Minister of State for Divestment Arun Shourie announced this at a press conference on Friday. Briefing newsmen at the end of the meeting when the cabinet took up the divestment issue for discussion, Shourie said that the government had decided to bring down its shareholding in IBP, STC and MMTC to 26 per cent and sell off its entire stake in BBL.

In the case of IBP, the government shareholding would be brought down from 59 per cent at present to 26 per cent. Likewise, the government stake in State Trading Corporation would be brought down from 91per cent to 26 per cent.

Metals and Mineral Trading Corporation will see the government shedding as much as 74 per cent, diluting its holding to 26 per cent. However, Bharat Brakes Limited would be completely sold off to the private sector.

International bidding would be invited in the case of the IBP, while competitive bidding would be held in the case of MMTC and STC.

The government will also offer employees stock options to the staff working at these companies and reserve 10 per cent for ESOP.

Talking to rediff.com after the meeting, Shourie denied that MMTC and STC had been doing a good job and were earning profits.

He affirmed that the government would protect the interests of the employees in all the cases. "The government is committed to protecting the interests of the employees. This would be part of the shareholders' agreement. In the case of STC and MMTC, the employees would be given shares up to 10 per cent of the total equity," he said.

When asked about why had the government decided to divest its pie in these two corporations the minister said: "There are good reasons for doing so."

"First, they were trading companies. Do you want that the government should continue to deal in trading. Second, they were trading in items that were canalised. As the canalisation has been done away with, what would these firms trade in? Then if you see the balance sheet, you will find that they are earning Rs 400 million a year. Actually, that is just the interest on reserves. You take away the interest and they would be making losses. We have yet to calculate how much we would earn by way of divestment. It is a cumbersome and time-consuming process," he elaborated.

The minister did not comment on whether any decision had been taken with regard to the issue of 'petro bonds' as was announced by the government when it hiked petroleum products' prices last week.

SEE ALSO:

Experts seek clear-cut divestment policy

Mid-term plan review prescribes speeding up divestment

Govt evaluating 'sticky issues' for VSNL, Maruti sell-off

Full transparency in PSUs valuation: Shourie

CCD clears HOCL, MSTC divestment

Government clears divestment strategy

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