The five per cent quota in primary market divestments allotted to PSU employees has been falling short.

The divestment of Indian Oil saw only 53 per cent of the five per cent quota being bought by employees. The Centre collected around Rs. 240 crores as sale proceeds. While in the NTPC offer for sale, about 85 per cent of the shares offered to employees were bought. The proceeds from that was Rs 200 crores.

In a bid to reach full potential in divestment drives and ensure greater participation of employees, a number of steps have been taken.

Last month, the Securities and Exchange Board of India (SEBI) raised the limit for employees buying shares from Rs. 2 lacs to Rs. 5 lacs per individual. SEBI examined this proposal during its meeting on September 23, and has now allowed companies to allot more shares for employees during public offers.

This limit is set only for primary market operations and SEBI officials have further clarified that there is no upper limit for secondary markets. So if a PSU employee wants to purchase stake worth more than Rs. 5 lacs in a secondary market, like a stock exchange, they can now do so.

More recently, PSU employees may be set to form trusts to buy more stake after the government informally communicated to PSUs to get their workforce to pool in their resources and form employee trusts to participate in divestment drives and use up the full five per cent quota allotted to them.

The formation of employee trusts is therefore being seen as a positive move to reach divestment targets and raise more proceeds. This coupled with the raised limit for buying shares by SEBI is hoped to improve participation of employees. 

An official reportedly told the Business Standard that forming such trusts would also constitute a healthy management practice. "If a trust buys more than a 10 per cent stake in a PSU, then employees will be able to represent themselves on the board of directors. They will be empowered," the official said.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.