The Telegraph
Since 1st March, 1999
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Govt to hunt for Balco arbitrator

New Delhi, Aug. 26: The government will start looking for a suitable arbitrator to settle the Balco row. Sterlite wants the government to sell the remaining 49 per cent stake in Bharat Aluminium Company to it. A meeting of the committee of secretaries is expected to be held soon on this issue.

A CAG report tabled in Parliament has indicted the previous NDA government for the way it undervalued Balco when selling a 51 per cent stake to Sterlite for a mere Rs 550 crore. So, the present government will take any step only after a lot of deliberations.

Senior officials said the mines ministry may even explore legal possibilities of revoking the sale altogether. However, the possibility does look remote, they added. Officials say, the report is “quite clear” when it says in view of sections within the Companies Act 1956 and Indian Contract Act 1872, the “provision of valuation date and call option do not survive and consequently Sterlite cannot exercise any option or force the government to accept the same”.

On the basis of the comptroller and auditor-general’s advice, the core group on disinvestment (CGD) decided some time back against selling the government’s remaining stake in Balco either to Sterlite or through a maiden offering to the public.

The attorney-general, in his written communication to the divestment group, had made it clear that the government has three options to choose from — freely negotiate the sale of rump Balco shares with Sterlite or any other third party based on the market rate, go in for a public issue, or decide not to sell the shares in public interest and for the profitability of Balco.

However, the government decided not to go in for a public issue of Balco shares as the CGD felt it would be difficult to sell unlisted shares to the public and Sterlite, the controlling firm, is unlikely to co-operate with the government by either listing the firm or in facilitating the share sale.

The CAG report said the valuation exercise never took into account assets like leasehold land on which the aluminium major's plant and housing colony stood, nor the railway sliding in Korba or accommodation in SCOPE complex in the heart of New Delhi. Moreover, the fact that Balco’s installed capacity had been increased to 1.31 lakh tonnes was not taken into consideration and the valuation was based on the old capacity of 91,000 tonnes.

Balco has always proved a jinxed deal for the government. When the BJP government sold it off for Rs 550 crore four years back, most opposition leaders, including many in today's cabinet, cried foul. That sale was based on an income tax valuer's estimate of Balco's assets at Rs 1,100 crore. Kapil Sibal, then a Congress MP in the upper House, had calculated the value to be anything between Rs 2,300 crore and Rs 4,500 crore depending on the valuation method taken.

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