New Delhi, Jun 21 (IANS): The Cabinet Committee on Economic Affairs (CCEA) Friday approved a five percent divestment in Neyveli Lignite Corporation (NLC) to fetch the government Rs.466 crore.

The Department of Disinvestment (DoD) had moved the cabinet seeking to sale over 7.8 crore shares, or five per cent, through an offer for sale (OFS) route in the Tamil Nadu-based miner.

With the divestment, the government's holding in the company will come down to 88.56 percent.

Earlier this month, the CCEA had put off a decision on this. Tamil Nadu Chief Minister J. Jayalalithaa had written to Prime Minister Manmohan Singh opposing the stake sale.

Announcing the decision, Finance Minister P. Chidambaram said the divestment was "absolutely necessary".

"It is a Navaratna company and its public sector character does not change with this stake sale," he told reporters after the CCEA meeting.

The Securities and Exchange Board of India (SEBI) has set an August 2013 deadline for all listed public sector units to have a minimum 10 percent public holding.

Chidambaram also said the prime minister had replied in detail to Jayalalithaa about "why it is absolutely necessary” to sell stake.

Jayalalithaa had suggested delisting NLC or amending the Securities Contracts (Regulation) Rules to make a special exemption for the company from the minimum public shareholding rule.