The disinvestment decisions and proposals would be held back, ''pending further review'' of the issue, a statement by the Prime Minister's Office (PMO) said.
''There have been representations from some of the constituents and allies of the United Progressive Alliance about the process of disinvestment in some public sector enterprises. Taking into account their concerns, the Prime Minister has decided to keep all disinvestment decisions on hold, pending further review,'' the PMO said.
Earlier in the day, the DMK, a major constituent of the UPA government, had threatened to pull out of the ruling coalition in protest against the decision to offload 10 per cent stake in the Neyveli Lignite Corporation in Tamil Nadu.
The DMK's sentiments, expressed by the party President and Chief Minister M Karunanidhi, were conveyed to Prime Minister Manmohan Singh by Communications and IT Minister Dayanidhi Maran.
The Prime Minister would now talk to Mr Karunanidhi, apparently to find a way out, Mr Maran said.
It could not be ascertained immediately whether the PM's decision was taken after talking to Mr Karunanidhi.
The Union Cabinet had recently offload 10 per cent of its stake in both NLC and NALCO, prompting immediate opposition from the Left and the DMK.
In a bid to mollify the DMK, Dr Singh announced that NLC employees would be allowed to acquire ''substantial part'' of the shares during the disinvestment.
The Prime Minister had said that the decision to involve the NLC in the disinvestment process was taken in deferrence to the wishes of the DMK.
However, the concession had obviously failed to persuade the DMK from blocking the disinvestment move.
Talking to reporters in Chennai, Mr Karunanidhi had indicated that his party would pull out of the Congress-led UPA government at the Centre if it failed to rescind its decision to divest equity in the public sector NLC.
''As the Centre is not in a position to concede the demand of NLC workers to drop the decision, I am wondering whether the DMK should be part of the UPA Government and share responsibility for its decision,'' he told newspersons at his party headquarters 'Anna Arivalayam.' Earlier, the Left parties had forced the government to abandon a move to sell stakes in the Navratna BHEL. Subsequently, the government also assured the Left that Navratnas would be left untouched, while 5-10 per cent of its stake in other PSUs would be offloaded in the market.
The Left has also stopped the government in its tracks in the matter of opening up the retail sector for the FDI, which has been allowed only for single branded outlets.
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