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New political alliance form government in Maharashtra makes it easier for SCI privatisation process

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MUMBAI: A change of government in Maharashtra with an alliance of Bharatiya Janata Party (BJP) and Eknath Shinde-led Shiv Sena faction coming to power will likely make it easier for the Centre to steam ahead with the privatisation of Shipping Corporation of India Ltd (SCI)

For months, the privatisation process of the national carrier has been stuck over the issue of separating the core and non-core assets of the company. A demerger scheme drafted for the separation process lacked clarity on whether it required approval from the Maharashtra government as the land on which the firm’s headquarters is constructed and its maritime training institute (MTI) operates in Mumbai were given by the state government.

A demerger scheme finalised in March said that the process of hiving off and alienation of MTI Powai and Shipping House (the headquarters of the firm) “will be subject to the approval of the state government” and the demerger “shall be made effective only after transfer of management control of SCI to the acquirer under the strategic disinvestment”.

This is because the Shipping House is constructed on leasehold land and the transfer of such lease to the resulting company (Shipping Corporation of India Land and Assets Ltd or SCILAL) would require “no objection” from the Maharashtra government.

The Maritime Training Institute (MTI) land and buildings are freehold property. But being an institutional property allotted by the government of Maharashtra to SCI with the specific object of running the Maritime Training Institute, it has certain restrictions on transfer and hence the same can be transferred to the resulting company (Shipping Corporation of India Land and Assets Ltd) subject to the no objection of the government of Maharashtra”.

However, these conditions were removed by the board of SCI on 6 May while approving a revised demerger scheme. The board also cleared a proposal to finalise the demerger scheme ahead of privatisation of the national carrier.

Legal experts, however, felt that merely removing the condition of seeking nod from the Maharashtra government on transfer of land, would not eliminate the risk involved in the demerger process, particularly when the State was ruled by a non-BJP alliance.

“The threat of the non-BJP alliance government in Maharashtra putting spokes in the demerger process by vetoing the transfer of Shipping House and MTI land was always there. The change of government in Maharashtra with an alliance aligned with the ruling BJP at the Centre will remove the uncertainties associated with the demerger process. It is a positive for the privatisation of SCI,” said an industry source tracking the deal.

The revised demerger scheme is currently awaiting nod from the company’s lenders after which it will be submitted to the market regulator, the Securities and Exchange Board of India (SEBI), for approval.

Thereafter, the scheme will be placed before the Ministry of Corporate Affairs for final clearance and then filed with the Registrar of Companies to make it effective.

The Department of Investment and Public Asset Management (DIPAM), the asset sale ministry, has initiated the process of privatising Shipping Corporation of India by selling the government’s 63.75 percent stake to a strategic buyer.

SCI is India’s biggest shipping company by fleet size, running 59 ships of various types.

Source : ET Infra

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