The government plans to introduce the concept of 'golden share' in infrastructure projects being executed through the public -private partnership mode.
The 'golden share', which will be owned by the government, will ensure that it has a say in all major decisions taken by the private concessionaire. It will also obviate the need for the government to invest in the equity of the company.
The proposal has been mooted by the Planning Commission in the new model concession agreement that it has developed for the infrastructure sector. The agreement has been circulated among various stakeholders for consultation.
The MCA says the private infrastructure developer, or the concessionaire, will sign an agreement with the government for issue of one non-transferable equity share of the company ('golden share') in favour of the government. The share shall entitle the government to nominate a non-retiring director on the board of the concessionaire.
According to the Planning Commission, the golden share-holder will have the right to veto any board resolution aimed at following: altering the memorandum and articles of association; changing the name of the company; issuing sweat equity shares; purchasing the company's own shares or specified securities; reducing the share capital; entering any new business; applying for winding up the company, among others.
A similar proposal was made during the rule of the national democratic alliance when the government wanted to divest its stake in state-owned banks and oil companies. However, the proposal could not take off due to stiff resistance from various quarters.
But now, the Planning Commission has made the proposal to bring greater transparency and accountability in implementation and operation of public-private partnership projects.
"This is a general model concession agreement prepared by the Planning Commission for infrastructure projects. All clauses and guidelines incorporated in the model agreement are recommendatory in nature and will be finalised in next three-six months", said Gajendra Haldea, advisor to deputy chairman, Planning Commission.
Amrit Pandurangi, executive director, Pricewaterhouse Coopers, citing the example of airport modernisation project, said, "When the government is holding 26 per cent stake in a project and the private concessionaire wants to expand the equity base, the government is forced to invest additional funds to maintain its minimum holding. The 'golden share' will facilitate greater control of the government without any significant investment by the government."
Since the concept is new to India, experts feel the government should apply it for only a few projects where larger public interest is involved.
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