PSE boards empowered to decide on closure, divestment

NEW DELHI: The cabinet on Wednesday empowered boards of state-owned companies to decide on the closure and divestment of units and subsidiaries.

At present, the board of directors of holding or parent public sector enterprises have been delegated certain powers to make equity investments to establish financial joint ventures and wholly-owned subsidiaries and undertake mergers/ acquisitions, subject to certain ceilings of net worth.

However, the boards do not have powers for disinvestment or closure of their subsidiaries or units or stake in joint ventures (JVs), except for some limited powers given to Maharatna PSEs for minority stake disinvestment in their subsidiaries.

Thus, Cabinet approval was required for both strategic disinvestment and minority stake sale or closure of the subsidiaries or units or sale of their stakes in a JV, irrespective of the size of operations or capital deployed of such subsidiaries.

“The Union cabinet, chaired by Prime Minister Narendra Modi, approved the proposal to empower the board of directors of the holding / parent public sector enterprise to recommend and undertake the process for disinvestment, both strategic disinvestment and minority stake sale, or closure of any of their subsidiaries/units/stake in JVs,” the government said.

The alternative mechanism on disinvestment will accord ‘in principle’ approval for disinvestment, both strategic disinvestment and minority take sale / closure of subsidiaries of Maharatna PSEs, which was delegated to them and reviewing the process of disinvestment or closure by the parent or holding PSEs.

The process for undertaking the strategic disinvestment transactions/closures to be followed by the PSEs should be based on the principles of competitive bidding and consistent with the guiding principles to be laid down by DIPAM.