Government to exit from MUL

The United Progressive Alliance Government on Thursday went into overdrive, ostensibly to kick-start some earlier proposals — residual stake sale in Maruti Udyog Limited and amendment of insurance laws, including a hike in the FDI cap — which were put on the back burner, mainly for lack of consensus in the wake of stiff opposition from its Left allies.

The Cabinet Committee on Economic Affairs (CCEA), at its meeting here, cleared the proposal for the Government's exit from Maruti by selling its 10.27 per cent residual stake in the joint venture with Suzuki Motors of Japan. The stake sale, at current prices, is likely to fetch the Government about Rs. 2,700 crore. Currently, Suzuki has the majority stake of 54.2 per cent in Maruti, which commands more than 50 per cent share of the domestic passenger car market. The sell-off of the Government's stake will imply offloading the remaining 2,96,79,689 shares (as on September 30, 2006) to public financial institutions, private sector banks and domestic mutual funds. For selling the stake, the Government is likely to come out with a floor price over which bids are to be invited. Finance Minister P. Chidambaram, however, refused to indicate when the shares would actually be sold. "Significant money can be raised through the sale which can be this fiscal, may be next fiscal... depends on the market condition. The call is mine," he told a briefing. The proceeds from the sale would not go to the National Investment Fund. "Strictly no, as this not a disinvestment of a public sector undertaking."

The decision completes the gradual withdrawal by the Government from Maruti. In June 2003, it sold a 27.5 per cent stake in the auto major to the public at Rs. 125 a share to mop up Rs. 993 crore.

On the insurance front, the Cabinet took up for discussion the hike in FDI cap from 26 to 49 per cent, which was part of the comprehensive amendments proposed earlier, and referred the issue to a Group of Ministers (GoM).

Mr. Chidambaram was confident that the GoM would not take more than two sittings to give its views. "It should not take much time since already, [the] K.P. Narasimhan Committee's report is there, views of [the] Law Ministry are there.''

The changes proposed pertain to amendments in the Insurance Act of 1999, the LIC Act, 1956 and the IRDA Act, 1999, among others. The UPA Government the proposed a hike in the FDI limit in its maiden budget in 2004-05. However, no decision could be taken in view of the Left opposition.