The Divestment Commission has recommended privatisation of three public sector enterprises, including the Rural Electrification Corporation.
In its 19th report submitted recently, the commission said government should divest its entire equity in REC, State Farms Corporation and Handicrafts and Handloom Export Corporation.
In the case of REC, it said government should move out of the company in a phased manner spread over a ten-year period, starting by offloading 49 per cent in favour of a strategic partner.
Thereafter, government should dilute its holding to 26 per cent by 2007 in tune with the time-frame set for achieving rural electrification while extracting a control premium from strategic partner. It also suggested government support for the company during this phase.
In the third phase, it recommended government should complete its exit from the enterprise in line with diminished role of the corporation by 2012.
Sounding out a warning to the company which has recently diversified into funding of generation activities, the commission said leveraging the balance sheet for such forays should be curtailed, failing which its financial problem may be aggravated.
However, it noted that withdrawal from these activities would require recapitalisation best undertaken at the current juncture.