Search the Internet          Tips  Sites: Finance, Investment

Major divestments by end 2001: Govt official

BUDGET 2001

The government aims to complete sales of major stakes in a slew of state-run companies within calendar 2001, a top civil servant in the divestment ministry said on Tuesday.

The deals included flag carrier Air-India, domestic carrier Indian Airlines, overseas telecommunications monopoly Videsh Sanchar Nigam Ltd, software services and hardware maintenance firm CMC Ltd, Hindustan Copper Ltd, Hindustan Zinc Ltd, National Fertilisers Ltd and Indian Tourism Development Corporation.

"I see all the deals happening in this calendar year, and hope the deal for Bharat Aluminium Company (Balco) will be complete by the end of the financial year (March 31)," said Divestment Secretary Pradeep Baijal.

The cash-strapped government is selling part of its holdings in these companies to raise money and to improve their financial performance by allowing private investors a say in management.

Yet the entire process could be slowed by the opposition raised to the first major asset sale. Parliament is debating a move by the government to sell 51 per cent of Balco, India's third-largest aluminium producer, to Sterlite Industries for Rs 5.51 billion.

Opposition lawmakers claim that the profitable company is being sold too cheaply.

"A lot will depend on what happens to Balco," said Baijal. "(Then) as we go along, we will write the rules."

The Balco deal is widely seen as a key step in the government's divestment exercise, as it is the first sale in a new strategy of giving management control of a profitable state-run firm to a private company.

"To me the Balco deal is very important. It is a big deal, and we have done a lot of due diligence on it, " said Baijal.

Yet even as the government was battling to win public support for the Balco sale, the privatisation process was dealt another blow by the poor response to the government's offer of 40 per cent in Air-India and 26 per cent in Indian Airlines, a primarily domestic air carrier.

Only two groups are left in the races for control of the two airlines after last Friday's deadline for finalising bidding partners and submitting detailed business plans.

Singapore Airlines in partnership with Tata group, and the UK-based billionaire Hinduja brothers in technical collaboration with Lufthansa Consulting GmbH, are the only groups left in the running for money-losing Air-India.

And the Hindujas and consumer electronics firm Videocon International are the only two bidders left in the race for Indian Airlines.

The poor response has raised concern that the amounts received for the two state-run airlines will be low, raising speculation that the government may scrap the current bidding process and call for new bids.

"All over the world investors are used to red carpet treatment. Here the carpet just keeps getting pulled away," said Gul Teckchandani, the chief investment officer of Sun F&C Asset Management which has Rs 20 billion under management.

"It's important that the government gets Balco and Air-India out of the way and be done with it."

Budget 2001
Money

Tell us what you think of this report