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A damper on divestment fervour

BS Economy Bureau in New Delhi

With the deferment of the strategic sale of Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd, the government's divestment programme has suffered a setback and it may miss the target of Rs 12,000 crore (Rs 120 billion) from divestment in the current financial year.

The Cabinet Committee on Divestment on Saturday night decided to defer the sale of the two petroleum companies along with public offers in Indian Oil Corporation, Oil and Natural Gas Corporation and Gas Authority of India Ltd for three months at the insistence of petroleum minister Ram Naik, whose stand was backed by several other ministers in the Cabinet.

When contacted, a senior divestment official said it was not clear if Saturday's decision meant that the February in-principle clearance to the sale of the two downstream marketing companies stood reversed, but said that the divestment programme of the two companies had been postponed till December this year.

"Consultations will now be held between the oil and divestment ministries to work out a solution for the logjam. Prime Minister Atal Bihari Vajpayee, who held a meeting of the key ministers before the CCD meeting Saturday, decided to put the process on hold till a consensus was formed," he said.

A visibly downcast divestment minister Arun Shourie told reporters that his ministry was no longer confident of achieving the budgetary target of Rs 12,000 crore (RS 120 billion) for the current fiscal. The minister, who had on Friday complained that the divestment process was being "ambushed", refused to take any questions on what transpired in the CCD meeting.

The meeting did, however, partly endorse his proposal of barring public sector units and trusts with over 51 per cent government equity from bidding for other PSUs.

While the decision will not affect the companies for which expressions of interest for future divestments have already been submitted by PSUs, the administrative ministries will have to seek CCD's approval if any of the companies under their control is interested in bidding.

Shourie also said the finance ministry would shortly move a proposal to set up an asset management company that would hold the entire government equity of PSUs lined up for divestment. "Although the exact contours of the AMC are still being finalised, according to the finance ministry proposal, once a PSU has been cleared for sale, its entire equity along with management control will pass on to the proposed AMC," he said.

The CCD, however, cleared the sale of hotel Ranjit in the national capital to Umesh Sarraf-promoted Unison Hotels at a price of Rs 30.30 crore (Rs 303 million). The bids for the property, which is expected to be converted into the northern India head office of Reliance Industries Ltd, had been received in May this year, but the sell-off got delayed following a difference of opinion on its valuation. The decision to stick to the original bids comes after a committee constituted to look into the sale recommended that the reserve price of Rs 23 crore (Rs 230 million) was fair for the property.

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