Cabinet Secretary to head panel on overseas asset buys by State-owned firms

The Government is working on a new strategy to garner a bigger share of vital natural resources across the globe.

A high level inter-ministerial coordination panel under the Cabinet Secretary is being formed to facilitate a consortium approach by State-owned firms and faster decision making in strategically important acquisitions such as coal blocks or uranium assets abroad. The move is specifically aimed at reversing the dismal track record of India's state-owned enterprises in this sphere and seeks to emulate the success of their counterparts in China in cornering overseas assets.

A cell is being created in the Department of Public Enterprises, which would be made operational with two senior consultants, six consultants and other support staff to service the proposed Coordinating Committee of Secretaries (CCOS).

The steps, which form part of the Government's new Policy for acquisition of Raw Material Assets abroad by central public sector enterprises (CPSEs), focuses on a co-ordinated approach in the hunt for resources such as coal and iron ore abroad, higher discretionary power for the boards of companies such as NTPC Ltd, Steel Authority of India Ltd (SAIL) and Coal India, and a cohesive view of funding entailed in such acquisitions. It comes at a time when a debilitating resource crunch threatens to stymie growth across core sectors.

Patchy success

While at the utility level a joint venture firm already exists, the success rate of this venture has been patchy, concede officials involved in the exercise. International Coal Ventures Pvt Ltd (ICVL) was set up by five state-owned firms to secure overseas coal assets two years ago.

The new proposal for the CCOS is being mandated to specifically address funding requirement for acquiring raw material assets abroad, including for the development of infrastructure along with the acquisition on a case-by-case basis. The focus is to avoid competition among Indian companies, reconciling interests of the nation vis-à-vis those of the CPSEs in the event of a conflict and facilitating “quick, coordinated decision making”.

Coordinating grant of concessional credit to foreign enterprises or governments in return for long-term commitment for the supply of natural resources has also been entrusted to the CCOS, something that China is actively doing in Africa. Constituting a Sovereign Wealth Fund that can serve as a corpus for financing investments in acquisitions of raw material assets has also been mooted.

The Policy also proposes a hike in the powers delegated to the boards of profit making PSUs for equity investment though mergers and acquisitions and in joint venture and subsidiaries floated for taking over assets abroad. The new policy would be applicable only to CPSEs in mining, manufacturing, electricity and the agriculture sectors having a three-year profit record.

The policy has been formulated at a time when despite a massive resource crunch back home, state-owned Indian utilities have not been able to register successes in their hunt for resources abroad on the scale of their Chinese counterparts, or even the limited success that Indian private payers have seen.

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