In a bid to rescue itself from slipping into a deeper fiscal deficit, the government on Thursday announced that cash-rich public sector units (PSUs) can now buy back shares in the stock market. It also means that the boards of cash-rich PSUs would now be able to buy back the government’s stake in their companies.

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As a matter of corporate governance, surplus cash which companies like Coal India, Steel Authority of India (SAIL), Oil India and National Thermal Power Corporation (NTPC) have kept aside for their expansion will now be used to bail out the government, so that it is able to meet its disinvestment targets, as was done in the auction of Oil and Natural Gas Corporation’s (ONGC) shares.

Market analyst Deven Choksey, managing director of KR Choksey, says, “I am not in full agreement with the government on such kind of practices. However, considering the macros like low tax collections and high fiscal deficit in the current fiscal year, a one-time buyback is not a bad strategy.”

Although PSUs will not be forced to go for buyback and only those that have not lined up spending plans will be asked to make use of the cash available with them, according to media reports quoting officials in the disinvestment department.

“It all depends on companies, it is just an enabling provision,” Praful Patel, minister of heavy industries, said after a meeting.

While the government’s recent effort to raise close to Rs 12,000 crore under the disinvestment plan went kaput, the approval may act as a further deterrent.

The controversy reins in over ONGC’s auction on Thursday, when minutes before the stock markets closed, it is believed, the government summoned Life Insurance Corporation to pitch in for the shares left unsubscribed after a lukewarm response from investors to the public offer. LIC, which is the largest investor in market, on its part denied they were forced to invest in ONGC. The market regulator Sebi has been asked to investigate the matter.

The auction of ONGC shares came at a time when the oil sector behemoth is marred by a huge burden of providing oil subsidy to the oil marketing companies like Hindustan Petroleum and Bharat Petroleum.

In fact, it was a first for any listed company in the stock market to go through such a process, and most analysts believed it was risky.