This article is more than 1 year old

This article is more than 1 year old

The Morrison government is revising key components of its much vaunted “big stick” divestiture power in the wake of internal objections from more than 20 backbenchers, with MPs arguing breaking up private companies offends core liberal values.

Sources have told Guardian Australia ministers are now in the process of refining the original government proposal to ensure that divesture happens only after a recommendation by Australia’s competition watchdog, which has first sanctioned poor corporate conduct.

The courts would also be the ultimate decision-makers, rather than a government minister – a notion that triggered an intense backlash in the business community, and arguments the regime may be unconstitutional.

Some government MPs have also urged senior ministers to impose a sunset clause on the proposed regime, and ensure that the circumstances for ordering divestiture be made more onerous than alleged price gouging by power companies, which is the trigger suggested by Scott Morrison and the energy minister Angus Taylor.

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Government sources say fourteen Liberals have expressed strong objections internally to the proposal as originally drafted, with a further eight or nine also expressing reservations. A delegation met the treasurer Josh Frydenberg, and Taylor, last Thursday.

The package, which is expected to go to the Coalition party room on Tuesday, went to the backbench treasury committee on Monday afternoon for discussion.

It is not clear whether the legislation, which will needed to be adjusted from the current exposure draft that has been circulated to stakeholders, will be introduced to the House this week.

The former Liberal MP, Julia Banks, who quit the government last week and moved to the crossbench, has also lent her voice to the criticisms from former colleagues. She told Guardian Australia she has major problems with the divestiture proposal.

On Monday night, Banks said: “The divestiture powers proposed are totally counter to liberal values of free enterprise and small government”.

“It will be a deterrent for future investment and won’t lower electricity prices but will actually have the reverse effect,” she said.

While some Liberals have profound philosophical objections to breaking up companies, divestiture is, however, supported strongly by the Nationals, particularly the former party leader Barnaby Joyce, who has his eye on extending the operating life of the ageing Liddell power station that AGL Energy wants to retire.

Some Liberals including Tony Pasin and Craig Kelly are also supportive.

Labor opposes divestiture. The package has also been the subject of a vocal backlash from major business organisations.

The commercial law firm Ashurst provided advice to the Australian Energy Council, which represents 22 major electricity and gas firms, arguing there were concerns about the “framing and constitutionality” of the Morrison government’s measures intended to force price relief for consumers and business.

The Business Council of Australia excoriated the original plan, declaring it will exacerbate sovereign risk, interfere with market outcomes and discourage investment in critical infrastructure.

While concessions are expected to quell most of the internal dissent, the rework is unlikely to be sufficient to get the energy sector back onside, and at this stage, the package is unlikely to clear the parliament without substantial amendments.

Morrison’s energy difficulties will likely be exacerbated on Tuesday with his predecessor, Malcolm Turnbull, due to make a speech on energy at a smart energy conference in Sydney.