New Delhi, Nov 7 (IANS): The government Thursday decided to divest 17 percent of its stake in the Power Grid Corporation through a follow-on public offer (FPO).

The Cabinet Committee on Economic Affairs, at a meeting here chaired by Prime Minister Manmohan Singh, gave the green signal to the proposal.

The divestment process include fresh issue of shares equivalent to 13 percent of the total paid-up capital of the company and 4 percent of government holding.

The government currently controls 69.42 percent stake in the Power Grid Corporation, a central public sector enterprise of Navratna category.

Additional resources generated through the issue of the FPO will be utilised by Power Grid Corporation in its investment programmes, according to an official statement released after the cabinet meeting here.

The divestment is part of the exercise under which the federal government is targeting to raise Rs.40,000 crore by selling stake in public sector enterprises.