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Govt to pay brokerage on PSU disinvestments

business Updated: Aug 10, 2010 21:46 IST
HT Correspondent
HT Correspondent
Hindustan Times
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Stung by the poor response of PSU employees to public offerings, the government has decided it will bear the brokerage charges in all public issues.

It will bear the expenses relating to the payment of brokerage to the brokers and sub-brokers, a finance ministry statement said.

“The decision aims to elicit widest possible participation of retail investors in government public issues,” the statement said.

The public sector issuers usually do not pay a brokerage charge on public issues, market sources said. This discourages brokers from promoting the stock to retail investors. The latest government move will ensure that brokers earn a fee, giving them an incentive, analysts said.

The move comes amid lukewarm response from retail investors and employees of publc sector undertakings (PSU) in public offerings of their own companies.

“What we have found in the seven or eight instances is that whatever was reserved for employees has not been fully subscribed. The best subscription we had was of REC, which went up to 75 per cent. And in some companies it has been as low as 20-25 per cent,” disinvestment secretary Sumit Bose said at a function organised by Standing Conference of Public Enterprises (Scope).

The government is banking heavily on disinvestment proceeds and auction of spectrum to bolster its revenues by an estimated Rs 40,000 crore during this fiscal year.

Over the next three years, the government plans to raise at least Rs 40,000 crore annually by selling stake in public sector firms.

In November last year, the government had decided that the general public should hold at least 10 per cent shares in all listed, profitable government-owned companies. It had raised Rs 25,000 crore in 2009-10.