Tamil Nadu chief minister J Jayalalithaa has set a novel precedent for states to follow — the state government is buying up stake in different central public sector units (CPSUs) in disinvestment moves of the union government. The Tamil nadu chief minister recently corresponded with prime minister Manmohan Singh on the impending sale of central government stake in Neyveli Lignite Corporation (NLC) and is reported to have received his approval.

Responding to a letter written by Jayalalithaa on July 7, Singh said her suggestion that Tamil Nadu state PSUs purchase five per cent out of government of India's shareholding in NLC has been discussed with SEBI. SEBI has informed that the possibility exists for a State Industrial Development Corporation to participate, "possibly with some preference", the Prime Minister's letter said.

"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 Department of Disinvestment and SEBI  so that we can comply with the relevant rules before August 8," Singh wrote to Jayalalithaa. The sale of five per cent stake in NLC is expected to yield between Rs 400 crore to Rs 500 crore.

Political analysts say that this could be the CM’s move to gain leverage over the Congress-led UPA government as the head of a non-Congress ruled state. They say Jayalalithaa’s move could soon become a way out of central government pressure for other non-Congress-ruled states.

The Tamil Nadu model is being touted as “Jayanomics”. The strategy to hold economic leverage over the union government has been tried out successfully by West Bengal chief minister Mamata Banerjee before in the case of FDI-in-retail. Banerjee had the union government on its knees over her party, Trinaool Congress’, support to the proposal in parliament.

Jayalalithaa’s move becomes all the more significant in the face of her well-publicised and long-standing political enmity with union finance minister P Chidambaram.

With the union government planning to divest its stake in NLC, it has to watch out for the Tamil Nadu government. If all non-Congress, non-BJP CMs, like Nitish Kumar (Bihar), Akhilesh Yadav (Uttar Pradesh), and Mamata Banerjee team up for disinvestment sales, the union government could suddenly be  facing tough negotiators.

The NLC sale will also hold significance for Jayalalithaa in the state politics as well with her political rival, Vaiko’s PMK, being strong in the Neyveli assembly constituency. The NLC buy out could allow her a stronger footing in the region.