Govt halts residual stake sale in VSNL, IPCL

Consequent to the Supreme Court's verdict halting the divestment of HPCL and BPCL, the government is understood to have put on hold the sale of its residual equity in privatised firms like Videsh Sanchar Nigam, IBP and IPCL.

Sources said the government fears that its plan to sell residual stakes in the divested PSUs may also be challenged on the grounds that such proceeds also went to the Consolidated Fund of India.

Also Read The Divestment Development: Complete Coverage

Although the Supreme Court had not questioned the divestment programme of the government it had raised certain issues like the role of Parliament vis-à-vis divestment as shares in PSUs were bought from the Consolidated Fund approved by the legislature.

The court in its verdict on September 16 had said the government could not go ahead with the divestment of the two public sector oil companies -- Hindustan Petroleum Corporation and Bharat Petroleum Corporation -- without getting 'appropriate approval' from Parliament.

Sources in the government pointed out that the Madras high court had already asked the Centre not to take a final decision on the privatisation of Madras Fertilisers till the court gave its verdict on a petition challenging the PSU's divestment.

There is a strong opinion in the government not to continue with the divestment process till adequate answers on certain constitutional questions raised by the Supreme Court, while staying the HPCL, BPCL selloff, was obtained.

As a result, privatisation of Shipping Corporation of India, Rashtriya Chemicals, and Dredging Corporation could hang in the balance as also the government's plans to divest stake in Engineers India and Balmer Lawrie.

While a "political decision" will be taken by the Cabinet Committee on Divestment, chaired by Prime Minister Atal Bihari Vajpayee, on October 3 on the future course of action, it is unlikely that the divestment ministry would go ahead with the sale of shares either in the PSUs or the residual stake in companies that have been privatised in recent time.