The Hindu Business Line : AMC plan for divestment shelved

THE Government has decided to shelve the proposal to set up an asset management company (AMC) to transfer the residual shareholding in PSUs, where disinvestment has taken place already, according to senior officials.

The proposal to form an AMC was endorsed by the Cabinet Committee on Disinvestment (CCD). The CCD had given a general direction to set up a 100 per cent government owned AMC to which the entire equity holding of companies slated for privatisation was to have been transferred.

The idea behind the proposal to set up an AMC was to manage the residual shares of the Government in PSUs, where management control has been transferred to a private partner. The AMC was supposed to advise the Government on all issues relating to the sale of these shares including the timing and the methodology of the sale.

The residual shareholding refers to the remaining shares retained by the Government after a strategic sale to a private sector partner.

In many recent cases of disinvestment, the Government had retained 26 per cent of the holding, with the aim of selling it off after a couple of years.

The Finance Ministry was mandated to finalise a paper on the proposal.

Half way down the line, when the proposal was being discussed, it was suggested that only the residual shares of the Government in PSUs needed to be transferred to the AMC.

Subsequently, after a review by senior officials of the Finance Ministry and the Ministry of Disinvestment, it was decided that there was no need to pursue the proposal further. These was because the shareholders' agreements signed between the Government and the strategic partner had clearly laid down the road map for the sale of the residual stake through put and call options.

Instead of setting up an AMC, it was suggested that an institution like Unit Trust of India could be roped in an advisory role to help the Government in managing the sale of the residual or remaining shares held by the Government in PSUs that have been privatised. But, this suggestion also failed to get adequate support.

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