The Hindu Business Line : Mines Ministry rejects plan to sell 5 pc Nalco stake to boost NIF — Will toe DoD line if proceeds are used to expansion

Industry & Economy - Disinvestment

Mines Ministry rejects plan to sell 5 pc Nalco stake to boost NIF — Will toe DoD line if proceeds are used to expansion

Ambarish Mukherjee

The Ministry would not agree too the proposal because the proceeds would be deposited in the Consolidated Fund of India and hence not be ploughed back into Nalco

New Delhi , Dec. 27

THE Ministry of Mines has turned down the Department of Disinvestment's (DoD) proposal to include National Aluminium Company Ltd (Nalco) in the list of profitable non-navaratna public sector undertakings in which the Government stake would be offloaded to raise resources for the National Investment Fund (NIF).

Sources said that the objection is against putting the funds into the NIF and the Ministry is agreeable to such plans if the proceeds are used to fund Nalco's expansion.The Government has already initiated the process of selling residual stake in the five already divested PSUs, namely Balco, IBP, IPCL, CMC and VSNL, which is expected to be completed during the last quarter of the current fiscal.

In order to prepare for the next round of disinvestments to be taken up during 2006-07, the DoD is in the process of consulting different Ministries for finalising the plans and the initial list included Nalco.

Officials told Business Line that "recently the DoD had proposed to the Ministry of Mines, which is the administrative Ministry for Nalco, for disinvestment of 5 per cent Government equity in the company, the proceeds of which would finally be credited to the National Investment Fund (NIF)."

"The DoD has also suggested that if necessary Nalco could issue an equivalent number of new shares and use the proceeds for its post second phase expansion," officials said.

If 5 per cent new shares were issued after 5 per cent disnvestment, then Government stake after disinvestment would come further down to 78.23 per cent from the present 87.15 per cent, officials said.

The Mines Ministry, in a written communication to the DoD, stated categorically that after examination of the proposal the Ministry could not agree because the proceeds would be deposited in the Consolidated Fund of India and hence not be ploughed back into Nalco to enable the company to raise funds from the debt market for its future expansion plans.

As regard to issue of fresh shares for funding expansions, the Ministry has made it clear that it was an altogether different matter and would be considered by Nalco if and when the need arises, officials said.