| Block deal
New Delhi, Dec. 7: A fresh controversy is in the offing over the government’s bid to sell National Building Construction Company Ltd (NBCC).
The urban development ministry, which runs the corporation, has protested to the disinvestment department against selling the company as it feels it is needed to complete various populist house building programmes announced by the BJP government.
A series of letters from the ministry to the disinvestment department, copies of which are with The Telegraph, show reluctance of the urban development ministry to agree to the planned selloff of 74 per cent stake in the company to private bidders. The government had already placed advertisements seeking expressions of interest from prospective buyers by December 8.
Top urban development ministry officials said the main problem was that much of the valuable real estate on which NBCC was sitting was given to the corporation on the clear understanding that it would remain a PSU and a change in status could create problems.
“It has huge assets. In fact, a conservative estimate by NBCC officials places the figure at Rs 1,556 crore,” said officials. The calculations include valuation of land assets the firm owns in Calcutta, Delhi and Mumbai at discounted or depreciated rates, “despite the fact that land assets are now again appreciating and not depreciating”.
But NBCC’s total income for the year was not more than Rs 500 crore. “If sold, the 74 per cent stake in the company could never fetch the near Rs 1,500 crore that it should if calculated with a management premium,” officials said.
Besides anxiety that the Prime Minister’s grandiose house building programmes might be jeopardised, the fear in the ministry is that the NBCC selloff will generate the same kind of controversy over valuation as the Balco deal did.
“We are afraid of a valuation mismatch which could generate unwanted heat,” officials said.
They also pointed out that their letters to the disinvestment department have pointed out that NBCC was involved in border fencing that they often performed under fire and works in the Northeast, which few reputed private sector agencies were willing to take up.
“NBCC has been able to deliver emergency responses in situations like Orissa floods and Gujarat earthquake more efficiently than government departments such as CPWD. This makes it important for us to try retain it in our stable,” they said.