Disinvestment Current Affairs - 2019
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The Union Cabinet headed by Prime Minister Narendra Modi has given ex-post facto approval for the creation of the Special Purpose Vehicle (SPV) and associated activities for the disinvestment of Air India and its subsidiaries/JV.
Air India Assets Holding Ltd.
- Debt of Air India Ltd. amounting to Rs. 29,464 crore would be transferred to Air India Assets Holding Ltd.
- The subsidiaries which are not part of Air India strategic disinvestment viz. Air India Air Transport Services Ltd. (AIATSL), Airline Allied Services Ltd. (AASL), Air India Engineering Services Ltd. (AIESL) and Hotel Corporation of India Ltd. (HCI) would be shifted to the special purpose vehicle.
- Non-core assets, painting and artefacts and other non-operational assets of Air India Ltd would also be transferred to the SPV.
- The board of directors of the SPV includes Director Finance as well as the chairman and managing director of Air India along with joint secretaries of Corporate Affairs, Investment and Public Asset Management, Expenditure, Economic Affairs.
The disinvestment proceeds from the Air India would be utilized to set off the working capital loan liability of Air India which are not backed by any asset and warehoused in the same SPV.
The Union Finance Ministry may come out with Rs. 10,000 crore follow-on fund offer of Bharat-22 exchange traded fund (ETF) as it looks to dilute stake in Coal India Limited (CIL) to meet the minimum public holding norm. Besides, it is also keen to takeETF route to sell off government shares held through Specified Undertaking of the Unit Trust of India in private companies (SUUTI)—ITC, Axis Bank and L&T.
The Union Government is planning to raise Rs. 80,000 crore in current fiscal from disinvestment, lower than over Rs. 1 trillion raised in 2017. The Bharat-22 ETF was launched in November 2017 to meet some part of this disinterment target. It comprises shares of 22 companies, including public sector undertakings (PSUs), public sector banks (PSBs), ITC, Axis Bank and L&T. The fund so far has garnered bids to tune of Rs.32,000 crore, although government retained only Rs. 14,500 crore.
Prior to the launch of Bharat-22 ETF, which has diversified portfolio, Union Government had floated CPSE ETF comprising stocks of 10 bluechip PSUs—ONGC, Coal India, IOC, GAIL (India), Oil India, PFC, Bharat Electronics, REC, Engineers India and Container Corporation of India. Through the CPSE ETF, the government had raised Rs. 11,500 crore in three tranches
Exchange Traded Fund (ETF)
ETF is index funds that offer security of fund and liquidity of stock listed and traded on exchanges. Much like index funds they mirror index, commodity, bonds or basket of assets. They are similar to mutual funds in certain manner but are more liquid as they can be sold quickly on stock exchanges like shares.
The ETFs trading value is based on the net asset value of the underlying stocks that it represents. Their price changes daily as they are traded throughout the day. ETF route is considered as safer mode of disinvestment as it shields investors against stock market volatility.