By R. Balashankar
Balco beckons again. Now it is the turn of the Congress Finance Minister, P. Chidambaram. Earlier 51 per cent stake of the company was sold for Rs 551 crore. Now it is fait accompli with 49 per cent stake, which the Congress is likely to sell for Rs 800 crore.
It is a role reversal. Reports say that when the Balco sale was formalised in March 2001, Chidambaram was on the board of the Vedanta Resources Plc, London?the parent company of Sterlite Industries?which bought the Bilaspur-based profit-making public sector aluminium company.
Arun Shourie was then the Disinvestment Minister of NDA government. The sale of 51 per cent stake of the company for just Rs 551 crore, when it had a cash reserve of Rs 400 crore in fixed deposit out of its profit and was still making profit, had raised a storm. But the deep-seated vested interests in the media and politics suppressed it.
There is a strong lobby which wants the Congress to keep its pre-poll promise. The Left parties with 60 MPs on whose support the sustenance of the government depends is hell bent on opposing further disinvestment.
Today, Chidambaram is Finance Minister. The disinvestment department comes directly under him. The Congress Party, which termed the NDA disinvestment a sinful scam, has on record given its nod to stop it and even reverse it. Will it keep the word?
There is a strong lobby, which wants the Congress to keep its pre-poll promise. The Left parties with 60 MPs on whose support the sustenance of the government depends is hell bent on opposing further disinvestment. For Chidam-baram it is a Hobson'schoice: either reward his former masters, or keep the dignity of his present office and protect the credibility of his nascent boss. There is a section in Congress which is very sceptic of Chidambaram. For, he joined the Congress only after he became a minister. Outside, he had supported the Balco deal.
According to the sale deal, the government is legally bound to sell the rest of the stake whenever the buyer called for it.
The pin-up boys of globalisation, be it Chidambaram, or others in other parties or in bureaucracy, are all one on economics. They may not necessarily follow any party line. They are for globalisation, come what may.
In Congress already there is unease. The party is reportedly divided on the issue. Organiser received a copy of a letter circulated by a Congressman, Namit Verma, to his colleagues in the party. In separate letters to Congress president, Sonia Gandhi and Chidambaram, he has cautioned against the sale of the 49 per cent stake in Balco to complete the privatisation of the company to the crowning advantage of the MNC. Many Congress MPs subscribe to this view. And Chidambaram is under pressure. The letter said, ?Unfortunately, the unprincipled parasitic brigade which feeds on government favours?amoral, illegal and anti-democratic?is quite capable of taking U-turns and attaching itself to the new ruling alliance, irrespective of their previous loyalties and alliances. The Congress-led UPA government needs to be beware of such forces. We must not allow them to taint us with the same brush of corruption that they painted the Vajpayee regime with.?
The letter says that during the Lok Sabha elections, the Congress had enumerated some of the alleged crimes of the NDA.
Vedanta Resources Plc, London and its Indian subsidiary, Sterlite Industries, are the major beneficiaries of the Balco privatisation. The Congress Party claims it is committed to re-examining and undoing these deals.
The Balco case assumes importance for several reasons, as this is the first major test before the UPA government. The Congressman has questioned as to why Vedanta Resources and Sterlite Industries, which also acquired Hindustan Copper Limited under the same terms as they acquired Balco, are not interested in citing the binding nature of contractual obligations in that case.
Till very recently, Vedanta Resources Plc had on its Board of Directors, P. Chidambaram who has since become Finance Minister of India. Since the Disinvestment Ministry has been reduced to the status of a Department under the Ministry of Finance, this suggests a clear case of conflict of interest. It is not certain that Chidambaram has as yet resigned from the Vedanta Resources Plc Board of Directors.
Given the serious implications of the conflict of interest, a clarification on the Finance Minister'srelationship with Balco'snew owners appears to be required: (a) Is he still on the Board of Directors, and (b) does the Finance Minister have any equity participation in Vedanta Resources or Sterlite Industries and what is the volume of such participation, Verma asks in a letter addressed to Congress workers. He has also written a separate letter to Chidambaram, seeking clarifications.
Land was allotted to Balco in Chhattisgarh's(erstwhile Madhya Pradesh?s) tribal area on the grounds that this was a PSU. Privatising this unit not only negates the various revenue code procedures in regard to tribal land, it also undermines the commitments of reciprocal government (PSU) interest in the development of the area. Again, it undermines the concept of a level playing field to all private promoters who are blocked out of that region on account of these restrictive land title procedures.
The note doing the rounds at the AICC says, ?Mr Palaniappan Chidambaram was on the other side of the fence with Sterlite'sAnil Aggarwal, and the NDA'sArun Shourie, Yashwant Sinha, Ranjan Battacharya et al., while at that time, were in the Congress Party, protesting this patently unfair privatisation of our country'snational resources for a mere pittance, a fraction of its real value.
?Chidambaram has subsequently rejoined the Congress Party in May 2004. He is therefore, now committed to upholding Congress principles, beliefs and values. The best case scenario would obviously involve Chidambaram using his undoubted influence with Vedanta Resouces Plc and its subsidiary Sterlite Industries, to right the wrongs done to the Indian nation.?
Some of the major points because of which the deal came under fire, were 1. Balco was a healthy, profit-making PSU. 2. It had a huge surplus cash reserve (Rs 400 crore, whereas the deal was for Rs 551 crore) which was sold with assets. This meant that the government sold the company and also gave money to the buyer. 3. Selling of controlling stakes (51 per cent) to Sterlite for less than 20 per cent of its equity valuation. 4. The manner in which the valuation experts were selected. 5. The term of sale, the ?call option? offer and other clauses. Under the ?call option? offer in the deal by the NDA government, Sterlite was given the right to call for the rest of the control of the company anytime after the end of three years of buying of majority stake in Balco. Sterlite promptly exercised this option in March 2004, at the end of three years.
According to the sale deal, the government is legally bound to sell the rest of the stake whenever the buyer called for it. Since it was a caretaker government, the NDA left the matter to the next government. This sale was to be done within 60 days of Sterlite calling for the rest of the shares.
Even after three years of the deal, the workers? agitation over the sale, Sterlite'svoluntary retirement offer to the workers and their overdues is continuing. Though some in the government are trying to argue that the sale will have to be done as it is ?binding?, there is pressure mounting on the Congress to rescind the entire deal. It is not only the Congress but the communists who are also up against the deal.