Trade policy review report by the secretariat

3.3.3  State-owned enterprises, and privatization

3.3.3.1  Role of state-owned enterprises (other than state-trading companies), and disinvestment

250. 
     Central public sector enterprises (CPSEs) continue to play an active role in the economy, holding significant market-share in several sectors/subsectors, e.g. petroleum and mining, power transmission and generation, nuclear energy, heavy engineering, the aviation industry, storage and public distribution system, shipping, insurance, and telecommunications.
     
251. 
     India's disinvestment policy is aimed at encouraging people-ownership of CPSEs while ensuring that the Government's equity does not fall below 51%, hence maintaining control of the enterprise. The Government's disinvestment programme in listed, profit-making CPSEs is governed by the Disinvestment Policy of November 2009, which aims to bring transparency and accountability in the day-to-day functioning of CPSEs and also to introduce market discipline. On 22 August 2014, the minimum public shareholding norm of CPSEs was raised from 10% to 25% to be achieved by end August 2017. In addition, the disinvestment programme envisages listing all unlisted profit-making CPSEs on stock exchanges; this will be achieved with the issue of fresh equity by the CPSE, or by the Government offloading its share in the stock market, or a combination of both.
     
252. 
     Since India's last Review, disinvestment of CPSEs has continued; a few CPSEs were recently approved for disinvestment (Table 3.21). Annual plans for disinvestment are approved by the Cabinet and included in annual budgets. Details of those companies to be disinvested and by how much are not published.
     
253. 
     At end-March 2014, 229 of India's 277 CPSEs were in operation.¹⁵¹
     

Table 3.31 Overview of disinvestment, 2011-15

CPSEs	Scenario	Year	Government's share (%)
CPSEs disinvested
Power Finance Corporation of India Ltd. (PFC)	Follow-on Public Offer (FPO). 5% along with 15% fresh equity raised by the company	2011-12	89.78
Oil & Natural Gas Corporation of India Ltd (ONGC)	Offer for sale of 4.91% of the Government's paid-up capital	2011-12	74.14
National Building Construction Corporation (NBCC)	Offer for sale of 10% of the Government's paid up capital	2012-13	100
Hindustan Copper Ltd. (HCL)	Offer for sale of 5.58% of the Government's paid-up capital	2012-13	99.59
National Mineral Development Corporation (NMDC) Ltd.	Offer for sale of 10% of the Government's paid up capital	2012-13	90
Oil India Ltd.	Offer for sale of 10% of the Government's paid up capital	2012-13	78.43
National Thermal Power Corporation (NTPC) Ltd.	Offer for sale of 9.50% of the Government's paid-up capital	2012-13	84.50
Rashtriya Chemical and Fertilizers Ltd (RCF)	Offer for sale of 12.5% of the Government's paid-up capital	2012-13	92.5
National Aluminium Company Ltd (NALCO)	Offer for sale of 6.09% of the Government's paid-up capital	2012-13	87.15
Steel Authority of India Ltd (SAIL)	Offer for sale of 5.82% of the Government's paid-up capital	2012-13	85.82
Hindustan Copper Ltd (HCL)	Offer for sale of 4.01% of the Government's paid-up capital	2013-14	94.01
ITDC Ltd	Offer for sale of 5% of the Government's paid up capital	2013-14	92.11
MMTC Ltd	Offer for sale of 9.33% of the Government's paid-up capital	2013-14	99.33
National Fertilizer Ltd (NFL)	Offer for sale of 7.64% of the Government's paid-up capital	2013-14	97.6
State-Trading Corporation Ltd (STC)	Offer for sale of 1.02% of the Government's paid-up capital	2013-14	91.02
Neyveli Lignite Corporation Ltd (NLC)	Offer for sale of 3.56% of the Government's paid-up capital	2013-14	93.56
Engineers India Ltd (EIL)	Offer for sale of 10% of the Government's paid up capital	2013-14	80.40
Indian Oil Corporation Ltd (IOCL)	Offer for sale of 10% the Government's paid-up capital	2013-14	78.92
National Hydroelectric Power Corporation (NHPC)	Buy-back of 10% by the Company	2013-14	86.36
Power Grid Corporation of India Ltd (PGCIL)	4% FPO and 13% of fresh equity raised by the Company	2013-14	69.42
Bharat Heavy Electric Ltd (BHEL)	Offer for sale of 4.66% of the Government's paid-up capital	2013-14	67.72
Steel Authority of India Ltd (SAIL)	Offer for Sale of 5% of paid-up equity capital of SAIL out of the Government's shareholding of 80%	2014-15	80
Coal India Ltd. (CIL)	Offer for sale of 10% of the Government's paid up capital	2014-15	89.65
CPSEs to be disinvested
Oil & Natural Gas Corporation of India Ltd (ONGC)	Offer for sale of 5% of the Government's paid up capital	2014-15	68.94
National Hydroelectric Power Corporation (NHPC)	Offer for sale of 11.36% of the Government's paid-up capital	2014-15	85.96
Power Finance Corporation (PFC)	Offer for sale of 5% of the Government's paid up capital	2014-15	72.80
Rural Electrification Corporation (REC)	Offer for sale of 5% of the Government's paid up capital	2014-15	65.64

Source: WTO Secretariat, based on information provided by the Indian authorities.

1. 
   Proceeds from disinvestment are placed in the National Investment Fund (NIF).¹⁵² In principle, 75% of the proceeds are allocated to the funding of selected social programmes and the remainder is invested in the modernization or expansion of profitable or revivable CPSEs.¹⁵³ On 17 January 2013, the Government approved restructuring of the NIF and decided that with effect from 2013 14 the disinvestment proceeds will be credited to the existing "Public Account" under the NIF and they would remain there until withdrawn/invested for the approved purpose. The allocations from the NIF will be decided in the annual Government budget. For 2013 14, the Government approved allocations from the NIF towards spending on recapitalization of public sector banks and capital expenditure of Indian railways.