People's Democracy

On Disinvestments Of BALCO Shares To M/s Sterlite

THE exercise of disinvestments of the residual shares of BALCO has been put in process giving rise to serious controversy involving public interest. When the BALCO was first privatised in 2001, the issue was hotly debated in the parliament. And the issue of gross impropriety of the entire process, gross under valuation of the worth of the company while handing over 51 per cent shares to M/s Sterlite had come to light. At that time, the parliament was assured by the then NDA government that the whole matter of BALCO disinvestments would be re-examined by the CAG. But even after five years, the report of CAG has not seen light. 

Meanwhile, the exercise for disinvestments of the residual 49 per cent government shares has resumed. No one but the Attorney General of India has firmly opined that the 49 per cent government shares have been grossly undervalued and it would not be in public interest to disinvest the government shares to M/s Sterlite, as valued by SBI Cap.

The entire process of valuation of government shares in BALCO has been improper. To avoid conflict of interest, the assignment for valuation has been given to SBI Cap. The SBI Cap outsourced the job to Dalal Mott Macdonald, which had linkage with Sterlite. And this has given rise to ‘conflict of interest’ between the assigned task vis-a-vis Sterlite. The valuation made by that company has been based on certain extremely flawed assumptions that the aluminium price will not increase in next five years; and BALCO, despite having invested Rs 3800 crores by March 2006, will stagnate after 2010.  These impractical assumptions were made in order to keep the value of government shares in BALCO extremely low. If in this process, the government proceeds with disinvestment of its residual shares to Sterlite that will be a serious injury to the public exchequer and to the country. It is also being said that the disinvestment of residual government shares to Sterlite is obligatory on the basis of the Shareholders’ Agreement. But again, the Attorney General has opined clearly, that there are three other options. One is that the government retain its shares in public interest.

It may also be noted that Sterlite in any case cannot claim any advantage in terms of Shareholders’ Agreement because Sterlite has grossly violated the Shareholders’ Agreement.  All the central trade unions had written jointly to prime minister on such violations by Sterlite.

Chittabrata Majumdar, general secretary of CITU and Rajya Sabha member raised the above points in his letter to the prime minister. He also requested the PM to stop disinvestments of residual government shares in BALCO and retain the same under strict supervision by the government nominees in the BALCO Board, in view of:

1. questionable asset valuation during disinvestments in 2001, which is yet to be vetted by CAG as per assurance in parliament

2. flagrant violation of Shareholders Agreement on labour related matters

3. gross under valuation of residual 49 per cent shares by SBI Caps through an agency M/s Dalal Mott Macdonald which has a conflict of interest vis-a-vis M/s Sterlite and

4. Attorney General’s opinion on under valuation of shares and government’s right to retain residual shares. .

Tapan Sen, secretary, CITU and Rajya Sabha member also raised these issues in his intervention in the House and urged the government to refrain from offloading the residual shares of BALCO to Sterlite in greater public interest.