INDIA BUSINESS WORLD - JUNE 2006
THE MONTH THAT WAS...

CABINET CLEARS NALCO, NLC SELLOFF & DUTY-FREE IMPORT OF FOOD ITEMS

   THE UPA government showed fresh resolve to move forward on critical reforms and take care of am aadmi by pushing for divestment in profitable PSUs and allowing import of foodgrains and sugar by private trade at zero duty. The longstalled disinvestment programme got going again with the Centre clearing the sale of 10% equity in Nalco and Neyveli Lignite Corp (NLC) in the market. The clearance was given by the Cabinet committee on economic affairs (CCEA) chaired by the PM.

The government also moved swiftly to quell rising inflationary expectations in the economy by allowing imports of sensitive food items such as wheat and sugar by private parties at zero duty. Prices of food items, measured by the wholesale price index, have been rising by around 10%. In case of Nalco, the government has decided to split the share before the offer of sale to ensure wider participation and make the issue more affordable.

Briefing reporters about the CCEA decisions, finance minister P Chidambaram said the proceeds from the proposed public offers of Nalco and NLC will go to the National Investment Fund (NIF). He said the Cabinet arrived at the decision with the concurrence of all ministers present in the meeting. This was significant because the mines ministry had spoken of allowing divestment in Nalco on the condition that the funds are ploughed back into PSU.

Post disinvestment, government's holding will fall to 77.15% in Nalco and to 83.56% in NLC. The timing of the offers will also depend on the prevailing market conditions. At current prices, Nalco disinvestment is likely to fetch up to Rs 1,400 crore and NLC Rs 1,200-1,300 crore.