The Finance Ministry has asked cash-rich PSUs such as Coal India, ONGC and Oil India to consider buying government equity in other state-run firms to help achieve Rs 40,000 crore disinvestment target in the current fiscal.

“We have written to all cash-rich PSUs enquiring about their cash balance and capex plans. We have told them if they do not have sufficient capex plans they should buyback government share or pay higher dividend,” a top government official told PTI.

The share sale of Coal India is the biggest disinvestment proposal for the government in the 2013-14 fiscal. The Government plans to raise about Rs 17,000 crore through the stake sale.

The proposed 10 per cent CIL stake sale may be split into offer-for-sale and government equity buyback by the company, the official said.

He further said in all such companies in which buyback can happen, the disinvestment through OFS would come first followed by a share buyback.

“Merchant bankers have suggested that buyback be done post OFS as share buyback usually happens at a premium,” the official added.

The Government plans to raise Rs 40,000 crore by way of disinvestment in the current fiscal and has already identified a host of companies for the same.

India’s 17 major public sector entities including CIL, ONGC, NMDC and OIL had over Rs 1.62 lakh crore in cash reserves during 2012-13.

Among these CPSEs, Coal India Ltd (CIL) had the maximum cash and bank balance at Rs 43,776 crore, followed by ONGC (Rs 22,450 crore), NMDC (Rs 17,230 crore) and NTPC (Rs 16,185 crore).

Cash and bank balance of Oil India (OIL) was at Rs 11,770 crore, SAIL at Rs 13,207 crore and Indian Oil Corp at Rs 1,290 crore.

The CPSEs usually use their funds for commercial purposes including capital expenditure and expansion, payment of dividend and tax, discharge of liabilities and working capital.

Among these, a host of central PSUs, including CIL, Indian Oil and SAIL, are in the government radar for disinvestment.

Under the buyback mode, the government can raise money by selling its equity in the company to the PSU itself.

The government had last year included various options including buyback of shares to prune its stake in state-run firms. No funds have been raised through the route so far.