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CVC, CAG turn down govt proposal on PSU sale

Chief Vigilance Commissioner and Comptroller and Auditor General have turned down the government proposal to freeze the principles and assumptions of valuation to minimise controversies in strategic sale of PSUs like Air-India, Divestment Minister Arun Shourie said on Friday.

Disivestment Department had requested CVC and CAG "to join us in freezing the principles and assumptions for valuation," he said, adding, "to my regret, they have concluded that doing so would not be in consonence with their statutory functions."

Such a request was made to CVC and CAG to minimise the possibility of controversies in an enterprise like Air- India, Shourie said making a statement to calling attention motion on PSU divestment in the Rajya Sabha.

The government has already refined the process of valuation and issued guidelines, he said, adding the standard practice is to value going concerns primarily by three methods--discounted cash flow, transaction multiple or relative valuation and balance sheet or the net asset valuation.

"We have decided to adopt even the asset valuation method (the fourth) so as to ascertain what the worth of the company would be in hypothetical or real eventuality of liquidation," he said.

Shourie said while drafting the shareholders' and share purchase agreement, all care had been taken to ensure that the country's security interests were safeguarded.

Besides, "we have striven hard to ensure that provisions are included to strengthen the health and prosperity of the company and to protect the interest of the employees," he said

Provisions had also been included to preclude malpractices about which apprehensions had been expressed like asset stripping, he said.

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