PM writes to Tamil Nadu CM on NLC disinvestment

The Prime Minister, Dr. Manmohan Singh, has written to the Chief Minister of Tamil Nadu, Dr. J. Jayalalithaa, on the proposed disinvestment of a further 5% out of the Government of India’s equity in the Neyveli Lignite Corporation. Following is the text of Prime Minister’s letter:

“Please refer to your letter of 7 July, 2013 regarding the disinvestment of a further 5% out of the Government of India’s equity in the Neyveli Lignite Corporation (NLC).

As I have earlier informed you in my letter of 8 June, 2013, such disinvestment is needed for compliance with the minimum public shareholding requirement under the Securities Contract (Regulation) Rules, 1957. The proposed 5% disinvestment will neither lead to privatization nor will it alter the public sector character of the company. At present, the Government of India’s shareholding is 93.56% and the remaining 6.44% shares are held by others. After a further dilution of equity by 5%, the shareholding of Government of India will be 88.56%. The “public sector” character of the company will not be affected at all as long as the Government of India continues to hold more than 51% of the shareholding in NLC. The fear that such a disinvestment would lead to privatization is, therefore, unfounded and devoid of facts.

Your suggestion that the Tamil Nadu State PSUs purchase 5% out of Government of India’s shareholding in NLC has been discussed with SEBI, which has informed that the possibility exists for a State Industrial Development Corporation to participate in an Institutional Placement Programme, possibly with some preference.

In order to give a final shape to the modalities of such an arrangement, I would request you to nominate a senior officer from the Government of Tamil Nadu to coordinate with the Department of Disinvestment and SEBI so that we can comply with the relevant rules before 8 August, 2013.

I would also urge you to work towards resumption of normal power generation by NLC, so that the Southern Region, including Tamil Nadu, does not suffer on account of power shortages. “