Govt drops plan to set up AMC for disinvestments

By SiliconIndia   |   Friday, 25 October 2002, 07:00 Hrs
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NEW DELHI: The Government has decided to cancel the proposal to set up an asset management company (AMC) to transfer the residual shareholding in PSUs, where disinvestments has taken place already, according to senior officials.

The proposal to form an AMC was authorized by the Cabinet Committee on Disinvestments (CCD). The CCD had given a general direction to set up a 100 per cent government owned AMC to which the entire equity holding of companies slated for privatization was to have been transferred.

The idea behind the proposal to set up an AMC was to manage the residual shares of the Government in PSUs, where management control has been transferred to a private partner. The AMC was supposed to advise the Government on all issues relating to the sale of these shares including the timing and the methodology of the sale.

The residual shareholding refers to the remaining shares retained by the Government after a strategic sale to a private sector partner.

In many recent cases of disinvestments, the Government had retained 26 per cent of the holding, with the aim of selling it off after a couple of years.

Consequently, after a review by senior officials of the Finance Ministry and the Ministry of Disinvestments, it was decided that there was no need to follow the proposal further. This was because the shareholdersÂ’ agreements signed between the Government and the strategic partner had clearly laid down the road map for the sale of the residual stake through put and calls options.

As an alternative of setting up an AMC, it was recommended that an institution like Unit Trust of India could help the Government in managing the sale of the residual or remaining shares held by the Government in PSUs that have been privatized. But, this suggestion also failed to get adequate support.

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