Public issue, listing must for all profitable state-run firms

New Delhi, Nov 5 : In a major push to the economic liberalisation process, India has decided to ensure at least 10 percent public holding in all profitable state-run firms that will see a host of public offerings by such companies over the next few years.

In another major decision taken Thursday, the government decided that proceeds from the divestment of equity in state-run firms can be directly used for capital expenditure on social sector programmes, rather than routing it through the National Investment Fund.

"All profitable central public sector undertakings should meet the mandatory listing of 10 percent public ownership," Home Minister P. Chidambaram told reporters here, after a meeting of the Cabinet Committee on Economic Affairs.

The meeting, presided over by Prime Minister Manmohan Singh, also decided that all the unlisted, but profitable state-run enterprises, must be quoted and traded on the stock exchanges.

These decisions had an immediate impact on the stock markets, when the sensitive index (Sensex) of the Bombay Stock Exchange (BSE) shot up by over 300 points within seconds, to more than make up for the losses incurred in the morning.

Out of 419 public sector firms under the central government, 51 are listed.

Chidambaram said to qualify for divestment and listing, a state-run company should have a positive net worth, no accumulated losses and have made net profits for the past three consecutive years.

On the decision to use proceeds from divestment directly, the home minister said this was on a special dispensation for the next three years and restricted to programmes identified by the Planning Commission and accepted by the government.

Thus far, proceeds from divestment went to the National Investment Fund that has a corpus of over Rs.2,000 crore.

Asked as to when the qualifying unlisted companies will hit the market, Chidambaram said: "At an appropriate time, when market is favourable." He said there were a large number of central undertakings identified by the Department of Disinvestment for sale of equity.