IT IS curtains for Sterlite Industries's proposal to buy 49 per cent government equity in Bharat Aluminium Company (Balco). Anil Aggarwal's Sterlite, which bought 51 per cent of the stake in Balco in 2001 during the NDA rule, had been hoping to corner the residual stake. On Thursday, its hopes were dashed after the Cabinet Committee on Economic Affairs (CCEA) decided to return the cheque for Rs 1,098 crore it had sent to the Finance Ministry.
Now Sterlite has two options. It can wait and buy the government shares from the open market when an open offer is made. Or it can contest the government's decision.
Briefing reporters, I&B Minister P.R. Dasmunsi said a panel of secretaries, headed by Cabinet Secretary B.K. Chaturvedi, has been set up to "look into the valuation" issue in Balco. The panel will take cognizance of the latest CAG report and recommend the price band at which the Centre can sell its equity in Balco.
Criticising the NDA government on disinvestment during 1999-2002, CAG had said in its report that in case of some PSUs, including Balco and VSNL, adequate efforts were not made to get the title deeds to the land and buildings. This impacted the “valuation of the properties adversely” and government equity was sold at lower than market-determined prices.
Dasmunsi said the NDA government sold the stake to Sterlite for Rs 551.50 crore — at Rs 49.01 per share — in 2001. In March 2004, Sterlite sent a call notice for acquiring the 49 per cent in Balco with a cheque for Rs 1,098 crore.
The government’s decision to return the cheque assumes significance against the backdrop of allegations made by Samajwadi Party MPs that Sterlite group’s growth was phenomenal when Finance Minister P. Chidambaram was associated with Vedanta, the group’s holding company.