Disclosing this here on Wednesday at a meeting with the PHD Chamber of Commerce and Industry members, disinvestment panel chairman GV Ramakrishna said setting up of the trust was important to draw up a comprehensive state-run units' selloff strategy.

"Instead of the special-purpose vehicle route, the trust proposal will come into effect," he said. There was no difference with the finance ministry on the issue, he said. "I and finance secretary Vijay Kelkar met recently and discussed the proposal. He has agreed to take the proposal to the government."

A high-powered group of secretaries had asked Kelkar in September to obtain views of the disinvestment commission on his proposal to set up a special- purpose vehicle - a non-government company- and left thedecision for the group of ministers. Ramakrishna had raised a series of objections on the proposal and mooted the idea of setting up a national trust for divestment.

In the first round, the trust could transfer 15-20 per cent shares of blue-chip state-run units with less than 70 per cent government holding to financial institutions and banks at a discounted price, he said.

They could offload their holdings in the domestic market at an appropriate time, preferably within six months to one year and share the profits with the trust, which, in turn, will be transferred back to the government, he said.

Later, the remaining holding ought to be divested to the institutions at market prices while retaining 26 per cent with them, he said. The trust and the institutions will need to work out a profit-sharing agreement on the subsequent sale of shares.

"The loss-making state-run units should be closed down after providing adequate compensation to the work force, while there should be no disinvestment instrategic units with 100 per cent government ownership.'' The trust should be incorporated under the Section 25 of the Companies Act, 1956. Its board could comprise chairmen of Industrial Development Bank of India, State Bank of India and Life Insurance Corporation, besides disinvestment commission chairman, eminent management experts, finance secretaries and state-run units' chief executive officers, he said.

"A speedy disinvestment programme has to be addressed by the government on a priority basis as the initiative would not only enhance enterprise value and maximise government capital receipts, but would also have an impact on the economy by reviving the capital market.''

Questioning the need for foreign merchant bankers to sell shares in the domestic market, he said domestic merchant bankers must be encouraged and their advice should be sought from time to time. "Foreign bankers should be involved only for GDRs.''

Innovative products must be designed for the foreign market, he said. "If a companyis good for a GDR listing, it should not be difficult to register it in the ADR market, and this method should also be tried for reviving the capital market.''

Promoters will fix prices for buyback: GVR

Divestment panel chief GV Ramakrishna has slammed the Sebi's share buyback guidelines saying promoters and their friends would be able to fix prices under the current norms.

Though the guidelines provide for prices to be fixed at a shareholders' meeting only, there is no way retail investors spread across the country can attend the meetings, as a result prices could be fixed in-house, he said.

"Only 10-12 per cent of shareholders attend annual general meetings, allowing promoters to set their own price for buybacks," he said.

To guard against price fixing, Sebi could have made postal-ballot system compulsory, making investors cast their opinion by post.

"Nothing prevented Sebi from making postal ballot compulsory for share pricing in buyback, or the regulator could have stopped promoters fromcasting their votes in this aspect." The chairman said buyback had raised more expectations among public than it could fulfil.