However, no timeline has been set for the stake sale, sources said, and that market conditions would be the deciding factor.
The proposal to divest SAIL is be the first disinvestment proposal in this fiscal and it comes after the lukewarm response to ONGC sell off last fiscal. The government holds 85.82 per cent in the country's largest steel producing company, and hopes to raise about Rs 4,000 crore from the stake sale.
The Cabinet also approved a 21 per cent duty on imported power equipments. The duty structure will include a 5 per cent import duty, 12 per cent countervailing duty (CVD) and 4 per cent special additional duty (SAD). The move is expected to create a level playing field for domestic power equipment producers like BHEL and L&T.
(Also read: Decision to dilute 10% stake in SAIL taken, Govenment to decided timing: SAIL chief)
The Cabinet Committee on Economic Affairs had in April 2010 approved 10 per cent disinvestment of government's share in SAIL along with issue of 10 per cent fresh equity by the company in two equal tranches. But due to some issues with merchant bankers and volatility in the market conditions the government deferred the SAIL offer.
In the power sector, projects generating over 1,000 megawatts (MW) of power will have to pay the duty on imported power equipments. These projects are exempted from duties at present. The move is expected to benefit at least six JVs including L&T-Mitsubishi Heavy Industries, Bharat Forge-Alstom, Ansaldo-GB Power, Toshiba-JSW, Thermax-Babcock and BGR-Hitachi entered into to produce power equipments.
The move, which has been in the works since 2010, will affect Chinese power-generation equipment firms such as Shandong Electric Power Construction Corp., Shanghai Electric Group Co. Ltd, Dongfang Electric Corp. Ltd and Harbin Power Equipment Co. Ltd, and their Indian customers—power companies such as Reliance Power Ltd, Lanco Infratech Ltd and Adani Power Ltd. Any rise in the cost of the equipment may also lead to higher power tariffs.
The Cabinet also extended the term of the Shah Commission for another year. The panel is investigating illegal mining activities. Some states, such as Karnataka, have banned mining altogether after allegations of rampant illegal mining, a move that has hit coal, power and metals and mineral companies.
The Forward Contracts Regulation Act (Amendment) Bill, however, deferred at the behest of coalition ally Trinamool Congress, since Railway Minister Mukul Roy was unable to attend the meeting. The proposal was on the agenda last week but was deferred then, too, due to opposition from the TMC.
The meeting was expected to approve the changes suggested by the Parliamentary Standing Committee to the Bill that has been hanging fire for a very long time and amend the Bill. The Parliamentary Committee wants greater autonomy for commodities market regulator Forward Market Commission (FMC) that also regulates the three spot online commodity exchanges, namely, Financial Technologies-promoted National Spot Exchange Ltd (NSEL), the National Commodity & Derivatives Exchange-promoted NSpot and Ahmedabad-based National Multi Commodity Exchange (NMCE).
The Committee's suggestions include freer entry for financial institutions and banks, mutual funds, and insurance companies be permitted to participate in forward market. This is expected to ensure better price discovery and low volatility. Options trading should be allowed for the benefit of farmers and new product launches like options and derivatives should be allowed under the law. Under the existing FCRA, hedging products such as options, indices are not permissible.
The Food and Consumer Affairs ministry hopes to introduce the FCRA Bill in the Monsoon session of Parliament.
The meeting also approved the sale of land held by telecom firm Videsh Sanchar Nigam (VSNL). Any excess land will be passed on to Hemisphere Property India, in which the union government holds a 51.12 per cent stake. The demerger of surplus VSNL land into a separate company had been pending since Tata Communications acquired the PSU in 2002. The land is estimated to fetch Rs 6,150 crore to the exchequer.
The demerger of 773.13 acres, spread over at least five locations including Delhi, Chennai and Pune, is proposed to be carried out through Hemisphere, a Special Purpose Vehicle formed through a Cabinet decision in 2005.
(With inputs from Sapna Das)