The Tamil Nadu Government has offered to acquire the 5 per cent stake to be divested by the Central Government in Neyveli Lignite Corporation. The stake is valued at over Rs 460 crore.

In a letter to Prime Minister Manmohan Singh, Chief Minister J. Jayalalithaa said the shares could be offered to State public sector undertakings such as the Tamil Nadu Industrial Development Corporation, State Industries Promotion Corporation and the TN Industrial Investment Corporation at the approved rate.

Minimum float

Urging the Centre not to sell the stake to a private entity, the Chief Minister said the prevailing regulations allowed for State PSUs to take a stake.

This will enable Neyveli Lignite meet the provisions of Rule 19(2) and Rule 19A of the Securities Contracts (Regulation) Rules. (The rules mandate that PSUs have a minimum 10 per cent public shareholding, by August. As of March 2013, the Centre holds 93.56 per cent; institutions 4.90 per cent and the public 6.44 per cent). The Securities and Exchange Board of India has indicated to Neyveli Lignite that its guidelines provide for divestment through an institutional placement programme or other options as approved by SEBI, on a case-by-case basis.

Tamil Nadu’s offer can be facilitated by SEBI, Jayalalithaa said. She said she has opposed the move since 2003. On May 23 and June 22, 2013, she had urged the Centre to drop the disinvestment plan. But the Prime Minister had ruled out the possibility.

This issue has provoked trade unions, which have announced a strike from July 3. Such unrest could lead to the shutdown of Neyveli power plants and aggravate the power shortage, Jayalalithaa said. The TN Chief Minister said there was apprehension that the disinvestment could be executed within a day’s notice under the amended Offer for Sale process prescribed by SEBI.

“Such a surreptitious move by the Government of India could seriously exacerbate the law and order situation in Tamil Nadu,” she added.

Our New Delhi Bureau adds:

Asked about Tamil Nadu offering to buy the Centre’s 5% stake in NLC, Finance Minister P. Chidambaram said: "I have not heard. But as soon as we receive it (proposal), we will certainly look into it."

Meanwhile, legal and securities law experts felt that it would be legally permissible for the Tamil Nadu Government controlled entities (undertakings) to purchase the 5 per cent stake from the central government. However, this will not comply in spirit with the objective of SEBI’s minimum public shareholding norm. M.S.Sahoo, Secretary, ICSI (Institute of Company Secretaries of India) told Business Line. The spirit is that there should be a market. Little public float will be there if the Central and State Governments were to control most of the holding. This may set a bad precedent, Sahoo pointed out.

> balaji.ar@thehindu.co.in

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