MUMBAI: The Union government has sought the backing of the Maharashtra government to waive off stamp duty – estimated to be some Rs250-300 crore – while de-merging the non-core assets of Shipping Corporation of India Ltd (SCI) into a separate company ahead of the planned privatisation of the national carrier.
The listing of the non-core company named Shipping Corporation of India Land and Assets Ltd (SCILAL) that will hold the non-core real estate of Shipping Corporation of India, such as the ‘Shipping House’ (the headquarters of SCI at Nariman Point in South Mumbai) and the land and buildings of the Maritime Training Institute at Powai in the city’s suburbs, has been delayed over the stamp duty issue, multiple source briefed on the matter said.
The splitting of the core shipping assets and the non-core real estate of the company into separate entities was approved by the Ministry of Corporate Affairs on 22 February.
The demerger is key to discovering the correct value of the company and for determining the reserve price during privatisation as the current share price reflects the entire business – both core and non-core – of SCI. The separation of the core and non-core assets of the company would also give the bidders a fair idea of what would be the value of the company going forward.
Hence, the Department of Investment and Public Asset Management (DIPAM), which manages asset sales for the government, can call price bids from the shortlisted bidders for the sale of Shipping Corporation of India only after the non-core company is listed on the stock exchange.
The transfer of the non-core assets of SCI to a new company entails registration of these immovable properties under SCILAL per the Maharashtra Stamp Act, triggering incidence of stamp duty – a statutory levy – estimated to be around Rs250-300 crore.
To smoothen privatisation of state-run firms, the Union government had framed a law that helps waive off stamp duty during demerger of core and non-core assets of a state-owned company, requiring transfer of assets from one company to another necessitating a re-registration and payment of stamp duty.
While the stamp duty is a state subject under the Constitution, the law on waiving off stamp duty during divestment has been kept under the concurrent list of the Constitution. This requires approval from the state government where the public sector undertaking is located, in this case Maharashtra.
The Union government has sought concurrence from the Maharashtra government on waiver of stamp duty to help demerge the core and non-core assets of Shipping Corporation of India and facilitate its strategic sale.
“A few days ago, top officials from the Department of Investment and Public Asset Management are said to have met the Maharashtra Revenue Secretary to expedite the matter so that the non-core company (SCILAL) can be listed on the stock exchange without further delay,” said an official with knowledge of the matter, asking not to be named.
“Until there is a clarity on this matter, the non-core company cannot be listed,” he said.
In December 2020, the Department of Investment and Public Asset Management, initiated the process of privatising Shipping Corporation of India, a so-called ‘navratna’ public sector undertaking, by selling the government’s 63.75 percent stake to a strategic buyer.
SCI is India’s biggest shipping company by fleet size, running 59 ships of various types.