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BALCO - THE DISINVESTMENT STORY
BALCO-A Profile
STAGE
I: THE TUG OF WAR
continued
from Page 2
STAGE II: THE CONTROVERSY DEEPENS
The deal between the GoI and SIL had attracted
considerable flak mainly from the Opposition. There was a niggling doubt over
the deal, which seemed to be a reflection of the lack of transparency. The GoI
said that the bids were valued by four different methods. However, the value
arrived at by these bids was not disclosed. Again, the reserve price was not
disclosed nor the value of the bids by Hindalco and Alcoa and whether they were
higher or lower than the reserve price. On 23 February 2001, Hindu Businessline
wrote, "It is entirely understandable, indeed even necessary, that an element of
secrecy is maintained when the bidding process is on. But once it is finished,
and the government's decision has been communicated, it would have been better
to have disclosed all the facts. Thus, the Government has lost an opportunity to
lay down new norms of transparency for similar big-ticket disinvestments."
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In a bid to placate the Opposition in Parliament, the GoI
decided to defer the signing of Balco sale papers till a debate took place in
both the houses of the Parliament (Lok Sabha and Rajya Sabha). Meanwhile, the
tug of war continued unabated between the GoI and the Opposition. Both Houses of
Parliament, reiterated their demand that no assets of the company be transferred
till it was discussed threadbare and okayed. Shourie, however, maintained that
there was nothing wrong with the valuation.
Meanwhile, in another significant development, Chhatisgarh Chief Minister Ajit
Jogi (Jogi) accused the GoI of indulging in 'underhand dealings' to the tune of
Rs 100 crore to sell off 51% stake in Balco to SIL and alleged the Prime
Minister's Office (PMO) was also involved in 'irregularities.' "
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Some functionaries in PMO are said to have received
kickbacks to the tune of Rs 100 crore for divestment of Government's equity in
Balco at a throw away price. The deal was like loot of Chhattisgarh in a
day-light robbery," Jogi alleged. When asked to name the functionaries involved
in the alleged 'scam,' he declined to disclose any details, but claimed that
four to five people, including a top official of Disinvestment Ministry were
involved in it. Jogi claimed that the sale of Balco equities would have fetched
at least Rs 5,000 crore. He said Balco with a cash deposit of Rs 450 crore and
annual profit of Rs 100-150 crore were being sold for a paltry Rs 551 crore. He
warned the state government would reconsider transferring lease of land and
mines to SIL if the GoI remained adamant on its decision.
In response to Jogi's allegations, Shourie said, "Jogi's calumny - that some
officials have received Rs 100 crore in the Balco disinvestment decision - is so
ludicrous as to border on the idiotic. First, every bit of the work within
Government was done by the officials of the Department of Mines and of
Disinvestment. At no stage, whatsoever was any official of the Prime Minister's
Office involved in the least." He further added, "Secondly, in this case, as in
every case of disinvestment, at every stage decisions were taken by groups of
officers and ministers: by the Inter-Ministerial Group. At every stage of the
selection of the adviser, of the selection of valuers, and eventually of the
selection of the strategic partner the selection was made on the basis of open,
competitive bidding. In the final stage, two bids were received in sealed
covers. One bid was twice the amount of the other. It was clearly above the
reserve price that the Evaluation Committee had determined. The Evaluation
Committee consisting of officials from several ministries and the adviser
recommended that this bid be accepted. The Core Group of Secretaries endorsed
the recommendation. The Cabinet Committee accepted the recommendation. The
entire procedure was open, indeed it was mechanical. There was absolutely no
reason for anyone to pay nor any occasion for anyone to expect anything,"
In a statement Shourie, said, "In the circumstances, I challenge Jogi to name a
single person connected with the central government - official or non-official -
who has taken a single paise in the entire process. I pledge that Jogi should
have the courage to do so he will face the consequences in the court. The moment
Jogi names the person, he will be taken to court for both criminal as well as
civil prosecution."
Analysts felt that the GoI got a good price for the 51% stake sold to Balco.
Said Roddy Sale, managing director and head, investment banking, J.P.Morgan, "Sterlite
followed every rule in the book and was willing to pay a substantial premium to
regular valuation." BusinessWorld wrote , "Also remember, Hindalco was willing
to pay only around half the amount Sterlite is willing to put up, while the
overseas companies backed out altogether. That alone should be enough to make
Jogi and company embrace Agarwal warmly."
STAGE III: THE DEBATE
STAGE IV: POST SELL OUT DRAMA
ALL'S (NOT) WELL THAT ENDS WELL
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