In a major development, Modi government has tweaked the guidelines for strategic disinvestment, making security clearance mandatory for all bidders who put in price bids for buying a central public sector enterprise (CPSE). Now, financial bid would be opened by the evaluation committee on strategic disinvestment only after potential suitors get security clearance, as per a report by news agency PTI.

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The government has lined up sale of its majority stake along with management control in BPCL, Air India, Shipping Corporation of India, Container Corporation of India, IDBI Bank, BEML, Pawan Hans, Neelachal Ispat Nigam in the next fiscal.

The guidance note framed in 2018 on strategic disinvestment by the Department of Investment and Public Asset Management (DIPAM) said that the core group on disinvestment, headed by Cabinet Secretary, would decide on a "case-to-case" basis whether security clearance is required for the "highest bidder" for the sale.

If the highest bidder does not get security clearance, the next highest bidder was given the option to match the price offered by the highest bidder. 

An official said that the guidance note has been tweaked since it has come to notice that there was some ambiguity in the rules, as per PTI. "Once financial bids are opened, the whole process of strategic sale almost reaches its closure. If after that, security clearance is not obtained by the highest bidder, then the whole process goes waste," the official added.

DIPAM - the government agency managing the stake sale - had last week issued a proforma of the application for security clearance of the acquirers.

According to the performa, any interest of more than 10 per cent in the bidding entity would require disclosures of parentage and beneficial ownership to get a security clearance.

In case the acquirer is a sole bidder, then it has to share with the government details, like nationality, address, parentage, unique ID number of the country of residence and passport number, of its directors and partners.

Also a self-declaration regarding the nature and extent of presence/operation of the bidder in China and Pakistan, if any would have to be provided by them.

In a strategic sale, bidders first put in expressions of interest or preliminary bids. After that due diligence is carried out by the government, while the bidders also get access to company's books.

Following that eligible bidders are shared the share purchase agreement, following which price bids are put in by interested bidders.

The government has budgeted to collect Rs 1.75 lakh crore from disinvestment in next fiscal, up from Rs 32,000 crore estimated to be mopped up in current fiscal.