India to sell REC stake to another state lender, Power Finance Corp
NEW DELHI, Dec 6 (Reuters) - The Indian government on
Thursday approved a plan by one state-owned lender to the power
industry, Power Finance Corp to acquire a majority
stake in a similar government-controlled lender, REC Ltd
, Finance Minister Arun Jaitley said.
The government did not disclose the price of the 52.63
percent stake but based on REC's closing share price on
Thursday, it would be worth around 108 billion rupees ($1.52
The sale may allow the government to say that it is getting
closer to meeting its target of raising 800 billion rupees
through the sale of government stakes in various entities in the
year ending March 31, 2019.
PFC will have management control of REC, Jaitley told a news
conference, adding that a ministerial panel will work out the
pricing and other aspects of the deal.
Jaitley had previously announced that the government would
support mergers and acquisitions in cases where state-owned
companies operated in the same area.
Before the announcement, which followed a cabinet meeting,
the government had raised 327.37 billion rupees from the sale of
government stakes during the current fiscal year, according to
an official website.
If it falls short of the target, the government could
struggle to meet its goal of bringing the fiscal deficit down to
3.3 percent of GDP in this fiscal year.
However, because the sale involves two state-controlled
entities, critics of the government's privatisation programme
say that any gains the administration of Prime Minister
Narendara Modi seeks to book are not credible as the money would
merely have gone from one pocket to another.
"The acquisition is driven by the government's intent to
meet its disinvest target ... Instead of a sovereign money, it
is a quasi-sovereign money. It is just creating a book entry,"
said stock market expert Ajay Bagga.
The government owns 66 percent of PFC.
It would not be the first time that the government has sold
a state-owned asset to another government entity and sought to
count the proceeds towards its target.
In the previous fiscal year the government sold its 51
percent stake in Hindustan Petroleum Corp to
state-owned explorer Oil and Natural Gas Corp.
India's April-October fiscal deficit was 103.9 percent of
the target, indicating that the government - which faces a
general election by May next year - must boost its tax and
non-tax revenue to fund various welfare schemes.
($1 = 70.9000 Indian rupees)
(Reporting by Nidhi Verma
Edited by Martin Howell and Adrian Croft)
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