The UPA govt has blown the whistle on the privatisation decisions of the previous National Democratic Alliance govt.
NEW DELHI: The UPA government has blown the whistle on the privatisation decisions of the previous National Democratic Alliance government. The Cabinet Committee on Economic Affairs (CCEA) on Thursday decided to form a three-member committee of secretaries headed by law secretary TK Vishwanathan to take “due cognisance” of the Comptroller and Auditor General’s report on the pricing and valuation of government equity in Balco, sold to the Sterlite group in 2001.
The CAG report, tabled in Parliament last week, had slammed the valuation process adopted for disinvestment of government equity in nine public sector companies, including Modern Food Industries, Bharat Aluminium Company, Hindustan Teleprinter Ltd, CMC Ltd, Hindustan Zinc Ltd, Videsh Sanchar Nigam Ltd, IBP and Indian Petrochemicals Corporation Ltd (IPCL).
It said the Balco valuer was given only 19 days to value fixed assets which, in the view of the asset valuer, required at least 45 days. “Asset valuation has inadequate documentary basis and adequacy of the valuation of civil works and plant and machinery was not verifiable in audit,” said the report.
Announcing the decision to form the committee, which has disinvestment secretary Sanjiv Mishra and mines secretary AKD Jadhav as members apart from Vishwanathan, information and broadcasting minister Priya Ranjan Das Munshi said the government had decided to return a cheque worth Rs 1,098 crore sent by Sterlite to the finance ministry for the purchase of the government’s balance stake in Balco.
While Das Munshi ruled out the option of a public issue of the residual stake, sources said the government would not resort to the extreme step of buying back the company from Sterlite by paying for the 51% equity held by the group.
The government sold 51% equity to Sterlite Industries, now part of the London-based Vedanta group, in 2001 for Rs 551.50 crore at the rate of Rs 49.01 a share.
Das Munshi said the clause for taking “cognisance” was added during the CCEA meeting. Sources said the initial idea of setting up the committee was to conduct amiable negotiations under the provisions of the shareholders’ agreement before proceeding for arbitration. Former chief justices VN Khare and SP Bharucha have been named arbitrators for the case.
Sterlite had entered into a shareholders’ agreement with the government in 2001 that granted it the first right of refusal for buying the residual stake in the company through a call option. The government refused to sell the residual 49% stake when Sterlite exercised the option on grounds of low valuation and violation of the Companies Act.
Sterlite had approached the Delhi high court challenging the government’s refusal to sell the residual stake in the company.
On August 4, the court asked the government and Sterlite Industries to go in for arbitration within four weeks to settle the issue.
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