Expressing concern over the decision of the state-run Steel Authority of India (SAIL) to acquire former Karnataka minister G Janardhan Reddy-promoted Brahmani Steel Ltd (BIL), a parliamentary standing committee has hauled up the ministry of steel for not conducting any investigation before submitting expression of interest as BIL had taken huge loans from banks and had legal disputes.
In March 2012, Union steel minister Beni Prasad Verma informed Parliament that SAIL in September 2011 registered its interest with the Andhra Pradesh government for acquiring BIL, which is mired in controversy in connection with YS Jaganmohan Reddy’s disproportionate assets case. The company was allotted 14,700 acres of land for iron ore mining in Kadapa district by the then chief minister YS Rajasekhara Reddy in May 2007 for setting up a steel plant with an investment of Rs 4,430 crore.
The committee found that the PSU was jumping into the mining sector without conducting any investigation or finding if the company was engaged in any criminal litigation.
However, SAIL, in its official response, said it had only registered its preliminary interest with the government of Andhra Pradesh, to seek its views formally. Had a formal confirmation come from the AP government, due diligence exercise would definitely have been carried out. Otherwise the exercise would have been seen as an avoidable exercise.
The PSU contended that the main objective of the takeover was to ensure raw material security as it was learnt that BIL had 100 MT of iron ore reserve. But rejecting it, the standing committee recommended a proper investigation before any offer is made, which was accepted by both the ministry and SAIL.
Replying to a query on the huge loans that BIL have taken, SAIL officials said this question needs to be answered by the Andhra Pradesh government as SAIL has not had any direct dealing with BIL. “At no point has SAIL either committed or suggested to take over the liabilities of the company.” Though it has been more than a year since SAIL expressed its interest, there has no response from the Andhra Pradesh government so far, the officials said.