The Prime Minister, Dr. Manmohan Singh, has written to the Chief Minister of Tamil Nadu, Dr. J. Jayalalithaa, on the proposed disinvestment of a further 5% out of the Government of India’s equity in the Neyveli Lignite Corporation. Following is the text of Prime Minister’s letter:

"Please refer to your letter of 7 July, 2013 regarding the disinvestment of a further 5% out of the Government of India’s equity in the Neyveli Lignite Corporation (NLC).

As I have earlier informed you in my letter of 8 June, 2013, such disinvestment is needed for compliance with the minimum public shareholding requirement under the Securities Contract (Regulation) Rules, 1957. The proposed 5% disinvestment will neither lead to privatization nor will it alter the public sector character of the company. At present, the Government of India’s shareholding is 93.56% and the remaining 6.44% shares are held by others. After a further dilution of equity by 5%, the shareholding of Government of India will be 88.56%. The “public sector” character of the company will not be affected at all as long as the Government of India continues to hold more than 51% of the shareholding in NLC. The fear that such a disinvestment would lead to privatization is, therefore, unfounded and devoid of facts.

Your suggestion that the Tamil Nadu State PSUs purchase 5% out of Government of India’s shareholding in NLC has been discussed with SEBI, which has informed that the possibility exists for a State Industrial Development Corporation to participate in an Institutional Placement Programme, possibly with some preference.

In order to give a final shape to the modalities of such an arrangement, I would request you to nominate a senior officer from the Government of Tamil Nadu to coordinate with the Department of Disinvestment and SEBI so that we can comply with the relevant rules before 8 August, 2013.

I would also urge you to work towards resumption of normal power generation by NLC, so that the Southern Region, including Tamil Nadu, does not suffer on account of power shortages."