+ All Categories
Home > Documents > p 1408 Disinvestment

p 1408 Disinvestment

Date post: 03-Jun-2018
Category:
Upload: parshant-gupta
View: 220 times
Download: 0 times
Share this document with a friend
29
Economics ACKNOWLEDGEMENT We would like to express sincere gratitude to Ms. Sapna.S & all those people who have given unending support and saw us right through the completion of this project.  We are hig hly indebted to the m for their guidance, for providing the needed information and also for th e va luable suggestion in en ha nc ing the standard of the report and we also thank for  reviewing the enti re ma nuscr ipt wi th pain st aking attention to all details and more so for their ability to spot and correct the minor error which inadvertently crept in. DISINVESTMENT
Transcript
Page 1: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 1/29

Economics

ACKNOWLEDGEMENT

We would like to express sincere gratitude to Ms.Sapna.S & all those people who have given unending

support and saw us right through the completion of this project.

  We are highly indebted to them for their guidance, for providing the needed information andalso for the valuable suggestion in enhancing thestandard of the report and we also thank for 

reviewing the entire manuscript with pain stakingattention to all details and more so for their ability tospot and correct the minor error which inadvertentlycrept in.

DISINVESTMENT

Page 2: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 2/29

Economics

 

CONTENTS

• INTRODUCTION.

• COMMON MINIMUM PROGRAMME.

• CASES:!"#$%, '%(% )!$(.

!"#$%, $*+# (#!-.

)(!-.

• 4. DISCUSSION.

• 5. TABLES: [1991-92 to 200-04! M!#(-/*!S $+#!.

!$-*S$#*" #(%/(

  S#$#!/* S$-!.

DISINVESTMENT

Page 3: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 3/29

Economics

INTRODUCTION:

Disinvestment is the action of anorganization or government of selling or

liquidating an asset or subsidiary.

E"OLUTION O# DISIN"ESTMENT POLIC$

*t has been decided that /overnment would disinvest up to 01 per cent of itse2uity in selected public sector undertakings, in favour of mutual funds andfinancial or investment institutions in the public sector. #he disinvestment,which would broad base the e2uity, improve management and enhance theavailability of resources for these enterprises, is also expected to yield s.0,311 crores to the exche2uer in4554650.  #he modalities and details of implementing this decision, which are

 being worked out, would be announced separately. #he policy, as enunciated by the /overnment, under the +rime Minister Shri handrashekhar was todivest up to 017 of the /overnment e2uity in selected +S!s in favour of 

 public sector institutional investors. #he objective of the policy was stated to be to broad6base e2uity, improve management, and enhance availability of resources for these +S!s and yield resources for the exche2uer.

PROBLEMS ASSOCIATED WIT% DISIN"ESTMENT:

  $ number of problems and issues have bedeviled the disinvestment process. #he number of bidders for e2uity has been small not only in thecase of financially weak +S%s, but also in that of better6performing +S%s.)esides, the government has often compelled financial institutions, %#* andother mutual funds to purchase the e2uity which was being unloadedthrough disinvestment. #hese organi8ations have not been very enthusiasticin listing and trading of shares purchased by them as it would reduce their control over +S%s. *nstances of insider trading of shares by them have alsocome to light. $ll this has led to low valuation or under pricing of e2uity.

DISINVESTMENT

Page 4: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 4/29

Economics

9urther, in many cases, disinvestment has not really changed theownership of +S%s, as the government has retained a majority stake in them.#here has been some apprehension that disinvestment of +S%s might resultin the :crowding out; of private corporates <through lowered subscription totheir shares= from the primary capital market

$n important fact that needs to be remembered in the context of divestment is that the e2uity in +S%s essentially belongs to the people. #hus,several independent commentators have maintained that in the absence of wider national consensus, a mere government decision to disinvest is notenough to carry out the sale of people;s assets. *nade2uate information about+S%s has impeded free, competitive and efficient bidding of shares, and afree trading of those shares. $lso, since the +S%s do not benefit monetarilyfrom disinvestment, they have been reluctant to prepare and distribute

 prospectuses. #his has in turn prevented the disinvestment process from being completely open and transparent.

-astly, to the extent that the sale of government e2uity in +S%s is to the*ndian private sector, there is no decline in national wealth. )ut the sale of such e2uity to foreign companies has far more serious implications relatingto national wealth, control and power, particularly if the e2uity is sold belowthe :correct; price.

*f the disinvestment policy is to be in wider public interests, it isnecessary to examine systematically, issues such as 6 the :correct; valuationof shares, the :crowding out; possibility, the appropriate use of disinvestment

 proceeds and the institutional and other prere2uisites.

isinvestment is generally expected to achieve a greater inflow of  private capital and the use of private management practices in +S%s, as wellas enable more effective monitoring of management discipline by the

 private shareholders. Such changes would lead to an increase in the

operational efficiency and the market value of the +S%s. #his in turn wouldenable the much needed revenue  generation by the government and helpreduce deficit financing.

 

(owever, to date the market experience has been otherwise. #he largenational budgetary deficit on revenue account has been increasing. #he

DISINVESTMENT

Page 5: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 5/29

Economics

government has not used the disinvestment proceeds to finance expenditureon capital account> i.e. the disinvestment policy has resulted in capitalconsumption rather than generation. $dministrative costs of thedisinvestment process have also been unduly high.

#he actual receipts through disinvestment have often fallen far short of their target. uring the period 4554650 to 01106011?, the government hadtargeted the mobili8ation of about s. @A,?11 crores through disinvestment,

 but it could actually mobili8e only s. ?1,54@ crores

  $fter a great deal of initial excitement and reservations, disinvestmentof public sector enterprises has become an ongoing process in the country.)ut the debate continues, with some enthusiastically endorsing it and others

expressing apprehensions and opposition. )y and large, this debate has beenat the ideological level. *deology cannot be kept out of the debate, butdisinvestment has other dimensions too. #he modalities of disinvestment areimportant. So are its conse2uences.

ne possibility is strategic sale with complete transfer of management toan enterprise in the private sector. Modern 9ood *ndustries, )harat$luminum ompany -imited <)$-=, BS"-, entaur (otel $irportMumbai and a few others were sold off in this manner.

  $ second procedure adopted was partial disinvestment whereby thegovernment still retained effective control by holding 34 per cent or more of e2uity. #his has been the procedure adopted in the majority of cases. #his isnot a simple procedure, though. $ decision has to be made as to who would

 be eligible to ac2uire the shares 6 other enterprises, employees or the publicat large 6 and the manner in which the shares are to be off6loaded.

DISINVESTMENT

Page 6: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 6/29

Economics

N&t'o(&) Co**o( M'('*+* P,o,&**

#he policy of the /overnment as stated in the "ational ommonMinimum +rogramme of May, 011C is as followsD E#he/overnment is committed to a strong and effective +ublic Sector whose social objectives are met by its commercial functioning.)ut for this, there is need for selectivity and a strategic focus. *t is

 pledged to devolve full managerial and commercial autonomy tosuccessful, profit6making ompanies operating in a competitiveenvironment. /enerally, profit6making ompanies will not be

 privatised. $ll privatisations will be considered on a transparent andconsultative case6by6case basis. #he existing E"avaratnaFcompanies will be retained in the public sector while thesecompanies raise resources from the capital market. While everyeffort will be made to moderni8e and restructure sick public sector companies and revive sick industry, chronically loss6making

companies will either be sold6off, or closed, after all workers havegot their legitimate dues and compensation. #he /overnment willinduct private industry to turn around companies that have

 potential for revival.

#he /overnment believes that privatisation should increasecompetition, not decrease it. *t will not support the emergence of any monopoly that only restricts competition. *t also believes thatthere must be a direct link between privatisation and social needs G like, for example, the use of privatisation revenues for designatedsocial sector schemes. +ublic sector companies and nationali8ed

 banks will be encouraged to enter the capital market to raiseresources and offer new investment avenues to retail investors.F

DISINVESTMENT

Page 7: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 7/29

Economics

DISINVESTMENT

Page 8: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 8/29

Economics

CENTAUR/ U%U BEAC%

 $ true6blue 3 star eluxe, the entaur 'uhu rises sphinx

like from the golden sands of MumbaiHs famous 'uhu beach. Shaped like a luxury liner, the hotel nestles betweenthe city and the rapidly developing industrial belt of thesuburbs.

  isinvestment of the hotelIflight kitchens of the (otel orporation of 

*ndia, a subsidiary of $ir *ndia, was initiated by $ir *ndia under thesupervision of the Ministry of ivil $viation. $ Sub6ommittee of the )oardof $ir *ndia was constituted by the said )oard to oversee the disinvestment

 process. n the basis of the Sub6ommitteeHs recommendation, $ir *ndiaappointed MIs 'ardine 9leming Securities *ndia -td. <currently known asMIs '+ Morgan *ndia +vt. -td= as /lobal $dvisors on 'une J, 0111. $nadvertisement inviting !xpressions of *nterest from the prospective bidderswas issued by $ir *ndia on ctober 44640, 0111 for all the businesses of the(otel orporation of *ndia including entaur (otel, 'uhu )each, andMumbai. #he Sub6ommittee, with the assistance of the /lobal $dvisors,accomplishedD

<i= 9inalisation of the transaction structure of selling the individual businesses on slump sale basis>

<ii= 9inalisation of the onfidential *nformation Memorandum>

<iii= Shortlisting of bidders>

<iv= $ppointment of -egal $dvisors and $sset Baluers>

<v= onducting data room study and due diligence by the bidders> and

<vi= 9inalisation of transaction documents.

  n 0@th September 0114, based on a /overnment decision, theepartment of isinvestment took over the process of disinvestment in(otel orporation of *ndia. $fter taking over the process, epartment of isinvestment constituted an *nter6Ministerial /roup and adopted thetransaction structure and transaction documents as finali8ed by $ir *ndia.

DISINVESTMENT

Page 9: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 9/29

Economics

  9or the five businesses of (otel orporation of *ndia that were offeredfor sale, the Kualified *nterested +arties had already been identified. *nrespect of entaur (otel 'uhu )each, Mumbai, !xpressions of *nterest werereceived initially from 01 parties of whom three were found to be ineligible.f the remaining 4@ Kualified *nterested +arties, 4J did not furnish the

 prescribed !xpression of *ntent -etters along with the !arnest Moneyeposit of s. 3 lakhs, thereby withdrawing themselves from further 

 participation from the disinvestment process. #herefore, there was only oneKualified *nterested +arty. n 0Cth ctober 0114, the /lobal $dvisorsaddressed the Kualified *nterested +arty, vi8., namely, MIs #ulip (ospitalityServices -td asking it to submit its price bid on Jth "ovember 0114. MIs#ulip (ospitality Services -td submitted its price bid on Jth "ovember 0114.

  $n !valuation ommittee comprising the concerned 'oint Secretaries of the Ministry of ivil $viation and the Ministry of isinvestment and theManaging irectors of $ir *ndia and (otel orporation of *ndia under thechairmanship of the 'oint Secretary & 9inancial $dvisor, Ministry of ivil$viation met on Ath "ovember 0114. $fter detailed consideration of theasset valuation report prepared by the $sset Baluer <MIs Lanti Lararnsey &o., Mumbai=, the valuation report prepared by the /lobal $dvisor and themerits and demerits of the various methods of valuation adopted by themand the then prevailing market conditions, the !valuation ommitteedetermined the reserve price for entaur (otel 'uhu beach Mumbai at s.

414.J1 crores. #he price bid, which was in a sealed cover, was thereafter opened by the !valuation ommittee on Ath "ovember 0114. #he bid wasfor s.43?.11 crores.

  #he !valuation ommittee recommended for acceptance thefinancial bid submitted by MIs #ulip (ospitality Services -td of s.43?.11crores for entaur (otel 'uhu )each, Mumbai, since it was above itsdetermined reserve price. #he *nter6Ministerial /roup, in its meeting held on5th "ovember 0114, accepted the recommendation of the !valuationommittee. #he recommendations of the !valuation ommitteeI*nter6

Ministerial /roup were accepted by the ore /roup of Secretaries onisinvestment on 5th "ovember 0114 and by the abinet ommittee onisinvestment on 41th "ovember 0114. *nitially, $ir *ndia proposed toexecute the $greement to Sell by 04st ecember 0114 and notified MIs#ulip (ospitality Services -td. (owever, MIs #ulip (ospitality Services -tdmade a series of representations from time to time, seeking extensions for conclusion of the transaction. #hree extensions were given to MIs #ulip

DISINVESTMENT

Page 10: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 10/29

Economics

(ospitality Services -td, the last being on 0?rd 9ebruary 0110. #heseextensions were given apparently with the view to complete the sale of entaur (otel, 'uhu )each, Mumbai at a price of s.43? crores, which wasabove the reserve price of s.414.J1 crores. Since some concerns had arisenwith respect to MIs #ulip (ospitality Services -imitedHs ability to meet thefinancial obligations under the transaction, a decision had been taken on 04st9ebruary 0110 to invoke the )ank /uarantee of MIs #ulip (ospitalityServices -imited and to terminate the deal. (owever, the hairman, MIs#ulip (ospitality Services -imited met the then Minister of isinvestmenton 00nd 9ebruary, 0110, and sought an opportunity to demonstrate MIs #ulip(ospitality Services -imitedHs intent to complete the transaction by

 producing his consortium of bankers before the Minister.

  n 0?rd 9ebruary 0110, MIs #ulip (ospitality Services -imited and theconsortium of bankers, which consisted of both public sector banks and

 private banks, met the then Minister of isinvestment and committed tofinance the sale transaction by 5th March, 0110. n this commitment, afurther extension was granted on 0?rd 9ebruary, 0110, until 5th March,0110. Since, 5th March, 0110 was a Saturday, high value clearing did nottake place and, conse2uently, the transaction was completed on 44th March0110. #he business was transferred to MIs #ulip (ospitality Services-imited on ?4st May 0110 on completion of transaction formalities.

  $s per the transaction $greement, MIs #ulip (ospitality Services-imited was bound to offer a Boluntary etirement Scheme to theemployees of the hotel by ?1th May, 011?. $nticipating that themanagement might not offer the Scheme in time, the fficersH $ssociationfiled a writ in the )ombay (igh ourt on 5th May, 011? itself. n thedirections of the (igh ourt, MIs #ulip (ospitality Services -imitedintroduced a Boluntary etirement Scheme on 4st ctober, 011?. Since thiswas not fully acceptable to the $ssociation, it approached the (igh ourtagain. (owever, the (igh ourt did not give any further relief. #hereafter,on 4st 'uly, 011C, the $ssociation moved the matter before a ivision )enchof the )ombay (igh ourt. While the matter is before the ivision )ench,the fficersH $ssociation and the management have come to an agreement onall critical issues on Jth $ugust, 011C. n the basis of this agreement, MIs#ulip (ospitality Services -imited filed an affidavit before the )ombay

DISINVESTMENT

Page 11: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 11/29

Economics

(igh ourt on 40th $ugust, 011C. #he case now stands adjourned to 41th'anuary 0113.

 

*t looks odd that it was a single bidder transaction. *t further looks odd

that the iscounted ash 9low method of evaluation was adopted in thiscase. We do not think that this method is the only method, or the mostappropriate method of evaluation in all cases. *t further looks odd that somuch indulgence was granted to the bidder by way of not invoking the bank guarantee, which was ordered twice, and by way of granting him repeatedextensions. We personally think that as a result of its disinvestment 8eal, thethen /overnment overlooked some discomforting aspects of this transaction.

  #he agreement does not permit the resale.  #he matter is now  sub

 judice before the (igh ourt of )ombay regarding the Boluntary etirementScheme. )ut, if there is a violation of agreement, certainly the Ministry of ivil $viation will be advised to take necessary action.

DISINVESTMENT

Page 12: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 12/29

Economics

CENTAUR/ AIRPORT %OTEL

*t was an announcement that shocked even the over8ealous minister for 

disinvestment, who believes nothing can go wrong with his high profiledrive to sell public properties at a rapid pace. n ctober 4A, 0110, )atra(ospitality +vt -td announced that it had sold entaur $irport (otel atMumbai to the Sahara *ndia group for a sum of s 443 crores. What wasreported as a routine commercial transaction by $ - )atra of )atra(ospitality has triggered a controversy that is likely to prove extremelyembarrassing to the government. #his was because the $irport entaur had

 been ac2uired by )atra from the $ir *ndia subsidiary (otel orporation of 

*ndia <(*= for a sum of just s A? crores, barely six months back. $t thattime, this sale of $irport entaur <along with the entaur (otels in 'uhu andajgir= was presented as one more case of the highly successful andtransparent, accelerated disinvestment drive that $run Shourie had launched.

#(! issue of resale of the disinvested Mumbai airport entaur hotel at a premium of s ?0 crores was raised on by an independent panel thatincluded +* <M= Member of +arliament, Mr. ipankar Mukherjee.

$ddressing a press conference here, Mr. Mukherjee said that the links between )atra (ospitality that bought the hotel and resold it at a substantial premium, and former +rime Minister, Mr. $tal )ihari BajpayeeHs son6in6law,Mr. anjan )hattacharya, should be probed by the entral )ureau of *nvestigation <)*=.

#erming )atra (ospitality as a shell company that did not have thefinancial strength or experience in running a hotel, Mr Mukherjee said thehotel was sold to it because of its ownerHs experience in running elhiHs

adisson (otel through $) (otels -td.

$re these links coincidental, incidental or accidentalN We are not puttinganyone in the dock. What we want is that the )* should investigate andexpose the entire scam, Mr Mukherjee said at a press conference in whichthe +* <M= /eneral Secretary, Mr +rakash Larat, was also present.

DISINVESTMENT

Page 13: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 13/29

Page 14: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 14/29

Economics

isinvestment Ministry did no wrong and that he was prepared to face anyin2uiry.

BHARAT HEAVY ELECTRICALS LIMITED

 #he ompanyHs principal activities are to manufacture and distribute

electrical, electronic, mechanical and nuclear power e2uipment. #heompany operates under two segmentsD +ower sector and *ndustrysector. +ower sector includes products and services relating to powergeneration sets and its auxiliaries. *ndustry sector includes products andservices relating to transportation and transmission, electric machines,industrial sets and / sets, telecommunications and other industrial

 products and systems. #he plants of the ompany are located in,anipet, /oindwal, 'agdishpur, #iruchy, udrapur, (yderabad,)angalore and other places

DISINVESTMENT

Page 15: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 15/29

Economics

E*)o3: C?530

B%EL DISIN"ESTMENT

!very policy decision taken by the %+$ /overnment must draw its

sustenance from the ommon Minimum +rogramme <M+= adopted by thealliance partners, the yardstick that has also to be applied to the )(!-

 partial disinvestment case.

DISINVESTMENT

Bharat

Heavy

Electricals

Limited

T',: 31141?

E67&(3: )M

2004 S&)3: A1,451,111,111

M&8o,

I(+3t,: !-!#*$-

S+ I(+3t,: 

M*S!--$"!%S!-!#*$-

Co+(t,: *"*$

Page 16: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 16/29

Economics

#his specific issue has been brewing for 2uite some time, and every time adecision was seen to be imminent it was shelved for consideration later. n#hursday, the Manmohan Singh /overnment went ahead with the decisionto sell 41 per cent of government e2uity which has, expectedly, set the catamong the pigeons as it were.

$ccording to reports, a statement issued by the +*<M= saidD )(!- is anavratna public sector unit which is making significant profits in acompetitive environment. )(!- significantly contributes to strengthening of *ndiaHs economic self6reliance.

#he M+, on whose basis this /overnment is meant to function, clearlystates that the %+$ will encourage and strengthen the navratnas to becomeglobal players. #he M+ also categorically states that the /overnment shall

not disinvestIprivati8e the profit6making +S%s. *n the light of thesecommitments made in the M+, the +*<M= considers the abinet decisioncontradictory.

$part from the fact that the 9inance Minister himself has said that the -eftwas consulted before the decision was taken, /overnment managershave been reported as saying that the step had been taken in accordance withthe norms contained in the M+.

#o 2uote them <as reported=D #he M+ is very clear. *t has only said that

PgenerallyH profit6making +S%s will not be privatised. *n any case, even after the decision, 3A per cent stake will remain in /overnment hands.

)esides, the M+ has said that all privatisation will be considered on atransparent and consultative case6by6case basis. *t has also said thatnavratnas will be allowed to raise resources from the capital market.

What does the M+ itself have to say on the subjectN #o 2uote the relevant portion of the +rogrammeD #he %+$ /overnment is committed to a strongand effective public sector whose social objectives are met by its

commercial functioning. )ut for this there is need for selectivity and astrategic focus.

#he %+$ is pledged to devolving full managerial and commercial autonomyto successful, profit6making companies operating in a competitiveenvironment. /enerally, profit6making companies will not be privatised.

DISINVESTMENT

Page 17: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 17/29

Economics

#he document continuesD $ll privatisation will be considered on atransparent and consultative case6by6case basis. #he %+$ will retain existingPnavratnaH companies in the public sector, while these companies raiseresources from the capital market. *t also believes that there must be a directlink between privatisation and social needs Q like, for example, the use of 

 privatisation revenues for designated social sector schemes. +ublic sector companies and nationalised banks will be encouraged to enter the capitalmarket to raise resources and offer new investment avenues to retailinvestors.

$s far as encouragement to retail investors is considered, the /overnmenthas been careful enough to split the stock offered for disinvestment so that a

 portion is reserved exclusively for the average citi8en.

#he details of the split6ratio are to be announced later in consultation withthe epartments of isinvestment and (eavy *ndustry and after the choiceof the lead manager.

$s regards the expenditure of the proceeds on social needs, the/overnment has said that three62uarters of the funds <around s 0, 011crore= will be spent on health and education, the remaining 03 per cent goinginto the revival of ailing +S%s.

Most important, the disinvestment proceeds will not be reflected in the

)udget, a euphemism for the disappearance of the funds into the bottomlessand colourless pit of the onsolidated 9und of *ndia.

#his is all very good, above board, and so on, but the basic issue appears to be whether the 41 per cent of government e2uity which will be put up for sale could have been leveraged to make )(!- even stronger and moreeffective, furthering the objective of making the company even more

 profitable in the highly competitive business world of today.

#his is the issue that needs to be gone into in some depth because what the

41 per cent sale decision could in fact mean is that )(!-Hs long6termstrategic interests have been sacrificed in the interests of garnering a fewthousand crores rupees today, which may or may not be utili8ed effectively,and in any case will not help the company in any way.

DISINVESTMENT

Page 18: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 18/29

Economics

T%E MOST PROMINENT DISCUSSION

D W7 '3 ,';&t'3&t'o( '*o,t&(t to I('&< 

A,+( S7o+,':  )ecause we have some 0C1 public sector companies in

the central government and about 4,111 in the state governments, and theyHrenot doing well. #he average rate of return from the central governmententerprises is only about C per cent, when the government itself borrows at41644 per cent. $nd, worse than that, if you take away the areas in which thegovernment has a monopoly, like petroleum, then the rate of return is minusC per cent.

DISINVESTMENT

Page 19: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 19/29

Economics

 $ll efforts to revive these companies have not really succeeded. )ringing inaggressive private partners is the best way to make them more competitive.

=: %o> >o+) o+ ,&t o+, o>( ,o,33 3o ?&, '( +37'( &7& >'t7

,';&t'3&t'o(<

$D *n the last ten months, we have completed 4A transactions 6 which is pretty big. My aim is to get privatisation off the front pages. *t should become a routine affair. We have successfully explained our position on privatisation in 41 debates in +arliament lasting nearly A1 hours. We haveanswered about J11 parliamentary 2uestions.  We have thwarted 45 challenges in the courts and ultimately received thestrongest endorsement from the Supreme ourt of *ndia, which says that the

 process being followed is completely transparent, just and fair. So weHvemade great progress.

 =: %o> &o+t o+, ,?o,*&( ;'3-&-;'3 ?'(&('&) t&,t3 t7

o;,(*(t 7&3 3t ?o, ,'t3 ?,o* ,';&t'3&t'o(<

$D * donHt work on the basis of financial targets. Some such targets have beenmentioned by the finance minister in his )udget. )ut those areapproximations. $nd even he agrees that we canHt just go on the basis of those targets, because then we will be accused of making distress sales.  We are laying the foundations of a process that is going to last 41 years,so we must be very thorough about this. We are satisfied at the pace at whichwe are working. =: W7&t &o+t t7 @+&)'t o? t7 &33t3 o( 3&)< It '3 &)) t7&t & )ot o? 

t7* &, 8+(. W7&t '3 o+, o**(t<

$D * donHt think so. Some are junk if you do nothing with them and persistwith them as they are. )ut when investors see that there is now the real

 prospect of bringing in aggressive private partners to run these companies,itHs a different story. "ote that itHs the stocks of government6related companies that have led theremarkable recent turnaround in the *ndian stock market. $nd we can take

credit for unlocking the hidden value in some of these companies.

=: W7&t &33t3 o o+ )'; >o+) o? '(t,3t to S'(&o,

'(;3to,3<

A: #he assets are across the spectrum 6 from mines and metals to telecoms,to many others. #here was a very good prospect in aviation, but * wonHt bereviving that very soon.

DISINVESTMENT

Page 20: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 20/29

Economics

=: W7 (ot<

$D Well both sides missed out an a very fine opportunity. *ndia certainlymissed out. $nd Singapore, because it was a very orderly society, was notused to the very high6decibel of debate in *ndia. * was counselling themD justwait for 43 days.  )ut then, they started looking at other prospects such as $nsett $irlines.$nd since then, the aviation industry itself fell into uncertain times. So *think itHs best to first strengthen our aviation enterprises 6 both domestic andforeign 6 before looking for strategic partners. =: W7&t )33o(3 7&3 I('& ,&>( ?,o* t7 6,'( o? S'(&o,

A',)'(3 &tt*t3 to + '(to A', I('&<

$D * think the main lesson should be drawn by the people who participate in

our public discourse and public life. *t is that we need better partners whowill change the work culture of our enterprises. $nd if we scare them awaywith our shouts then we loose. #hey may just lose a business opportunity,

 but we lose an opportunity to improve our work culture. * mention this in+arliament when the shouting was going on. * saidD Oou are scaring away

 bidders. $nd when that actually happened, * told themD * told you so.

=: A( '3 o+, *33& tt'( t7,o+7<

$D * think so. *n the last 43 privatisations, there have been hardly anycriticisms, just some pro6forma noises. Maybe when the next +arliamentsession starts on 43th there will be some shouting but * feel we are gettingthe message through. We are especially getting through to labour, whichused to be instigated by others who scared them by sayingD Oou will looseyour jobs.)ut labour is actually finding out that privatisation is the best way for their enterprises to survive and become more competitive. #he new owners and

 partners have entered into long term wage agreements with workers. Wageshave increased in some cases, by more than 01 per cent.

=: W7, &, t7 *&'( o3t&)3 o+ ?&<$D #he main obstacles we face are similar to what the %S and !urope facewith agricultural subsidies. nly ?6C per cent of population depends on thesesubsidies, but a politics and a discourse congeals around the issue. #hatHs our main difficulty.Second, in *ndia, we have a fractured electorate and fractured legislatures, soeverybody has power to block anything, and not many people have enough

DISINVESTMENT

Page 21: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 21/29

Economics

 power to push things through. )ut that problem will be alleviated in comingmonths because state governments are now on the brink of beginning

 privatisation of their own enterprises. So if they do it in their states, theycanHt oppose it at the centre.

=: B+t o(t o+ 7&; oo3't'o( ?,o* ;( >'t7'( o+, o>( &,t<

$D Well, yes, because every party is diverse and everybody has an opinion,)ut in one or two years, with fifty enterprises privatised and the resultsvisible, this opposition will subside.

*t is important to remember that in *ndia, when a reform is first proposed,there is a lot of shouting. )ut than two years later, after it has beenintroduced and gone through, nobody even noticed it.

=: C&( o+ '; &( 6&*) o? t7'3<

$D When *ndia was to sign the convention on intellectual property rights,there was a lot of opposition. )ut it was signed, and now nobody shouts.#hen, on allowing foreign companies into the insurance sector, there wasagain a lot of shouting. )ut now, foreign firms have come in, and many

 people donHt even know this. So it is with privatisation. *f you ask theoriginal opponents (ow many enterprises have been sold in the last tenmonthsN * donHt think they will come up with a figure close to eighteen.

=: A, t7', (?'t3 ?,o* ,';&t'3&t'o( t7&t o+ &( &),& o'(t to<

$D #ake the case of Modern 9oods, which makes bread. *ts sales are aboutninety per cent higher than just a year ago. Workers average pay hasincreased. #he plants are hygienic.  *n the case of )alco <)harat $luminium ompany=, an expansion

 programmme of ?111 <three thousand= crore rupees <S R4.13 billion= has been announced. "ot a single worker has been retrenched. $ five year wageagreement has been entered into, which provided for an immediate twenty

 percent increase in the basic wage.

=: W7&t ,';&t'&t'o( ,o33 &, o+ ?o))o>'(<

$D #he initial approach was to unload some government shareholding, in theform of minority stakes. )ut this was not changing the work culture or themanagements of enterprises. So now, the government is going in for strategic partners and, in some cases, outright sale.  We are willing to relin2uish majority control in all but a few strategicindustries like defence, atomic energy and railways. We have also nowintroduced an element in which, let;s say the government maintains 0J per 

DISINVESTMENT

Page 22: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 22/29

Economics

cent e2uity in the first round. )ut if the enterprise starts to do really well, thegovernment exits even sooner.

=: O;, >7&t t'* ?,&* o o+ 7o to o*)t I('&3 ,';&t'&t'o(/

&( >7&t >')) 3&t'3? o+ t7&t 't 7&3 ( & 3+33<

$D * have studied 4C countries privati8ations, and they have lasted 4164@years. * would expect *ndia;s privati8ation to last 41 years or so. *t willgather momentum and become a routine affairs. * have been pushing for itfor ?1 years.  * will fill vindicated when a process is in place G as it is now6 and whenthere is not a single allegation of corruption or wrongdoing.* have said many times in +arliament that if you want to make any allegationlike this, make it outside the legislature and * will sue you in court. $nd now,those very persons who made such allegations last year are sayingD Eh, but

* never opposed privati8ation.F

D'3'(;3t*(t ?,o* 1991-92 to 2004-05/ t7

*t7oo)o'3 &ot

$&,

No. o? 

t,&(3&

t'o(3 '(>7'7

@+'t

3o)

T&,t ,'tR3. '( C,o,

At+&)

,'t3R3. '(

C,o,

Mt7oo)o

DISINVESTMENT

Page 23: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 23/29

Economics

4554650 C@ 0311 ?1?@.@CMinority shares sold in ec 4554 and4550 by auction method in bundles ogood, good and average compan

455065? 05 0311 4540.C0Shares sold separately for each compauction method.

455?65C 6 ?311 1.11!2uity of J companies sold by open a

 but proceeds received in 5C653.

455C653 4@ C111 CAC?.41Sale through auction method, in whicand other persons legally permitted tohold or sell e2uity, allowed to particip

455365J 3 @111 4JA.CA !2uities of C companies auctioned

455J65@ 4 3111 [email protected]@ / <BS"-= in international market

455@65A 4 CA11 541.11 / <M#"-= in international marke

455A655 3 3111 [email protected]

/ <BS"-= I omestic offerings w participation of 9**s <", /$*ross purchase by ? il sector compa/$*-, "/ & *

3 41111 4AJ1.4C/Q/$*-, BS"-6domestic issue,)$- restructuring, M9*-;s strategand others

0111614 3 41111 [email protected] sale of )$-, -'M> #akL- <-=, +- <M-=, )+-

DISINVESTMENT

Page 24: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 24/29

Economics

0114610 A 40,111 3J?0.03

Strategic sale of M G 347, (#- GBS"- G 037, *)+ G ??.3A7, ++-66 @and sale of hotel properties of *# &

receipt from surplus cash reserves froand MM#

011061? A 40,111 [email protected]

Strategic saleD (T- <0J7=, *+- <037(*, *#, MarutiD control premiumrenunciation of rights issue, +ut ptioM9*- <0J7=, Shares to employees inM and BS"-.

011?61C 0 4C,311 [email protected]

'essop & o. -td.<@07 Strategic Sale<4A.507 all ption=, through +ublicMaruti <[email protected]=, ** -td. <5.07=, *)+*+- <0A.5C37=, M <0J.037=, <017=, /$*- <41.7= and "/ <5.5

011C613 ? C,111 [email protected]@ "#+ <3.037 ffer for Sale=, *+- <

!mployees= and "/ <1.147=

Tot&) 9F00 4HF4F.4

#'+,3 &, '()+3'; o? o(t,o) ,*'+*/ ';'(J';'( t&6/

,3t,+t+,'( &( t,&(3?, o? 3+,)+3 &37 ,3,;3 ,'o, to

'3'(;3t*(t.

R&)'3&t'o( t7,o+7 3t,&t' 3&) +,'(1999-2000 to 2004-05

DISINVESTMENT

Page 25: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 25/29

Economics

Sr.No

Name Percentage of  GovernmentEquity sold

RealisationRs. in crore

Profit/LossMaking during

the year of 

disinvestment

a. Modern !ood "ndustries#"ndia$ Ltd. #M!"L$

%& '(.&( Loss Making

). #M!"L$ Phase "" *(.++( &&.'%

,a. -M- Ltd. ( (* Profit Making

, ) -M- Ltd. .'%

& 0L %& (( Profit Making

(. Lagan 1ute Machinery-or2oration

%& *.(, Loss Making

"03-4+ 50ELS

. otel 6gra 6shok 7+.+% ,. Loss Making

% otel 8odhgaya 6shok 7+.+% .7 Loss Making

7. otel assan 6shok 7+.+% *.*% Loss Making

+. 0868R Mamalla2uram 7+.+% ., Loss Making

DISINVESTMENT

Page 26: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 26/29

Economics

'. otel Madurai 6shok 7+.+% &.+% Loss Making

. otel 6shok 8angalore 9 7+.+% ,+.& Loss Making

*. :uta) otel; Ne< 3elhi 7+.+% ,&.& Loss Making

,. Lodhi otel; Ne< 3elhi 7+.+% %.+, Loss Making

&. L=P; >dai2ur 7+.+% .%% Loss Making

(. otel Manali 6shok 7+.+% ,.( Loss Making

. ?68R; ?ovalam 7+.+% &'.,+ Loss Making

%. otel 6uranga)ad 6shok 7+.+% .(' Loss Making

7. otel 6ir2ort 6shok;?olkata 7+.+% +.,+ Loss Making

+. otel ?ha@uraho 6shok 7+.+% *.+ Loss Making

*'. otel =aranasi 6shok 7+.+% 7.,7 Loss Making

*. otel ?anishka; Ne< 3elhi 7+.+% +*.,% Loss Making

**. otel "ndra2rastha ; Ne<3elhi

7+.+% &,.,+ Loss Making

*,. -handigarh otel 2ro@ect 7+.+% %.*% Loss Making

DISINVESTMENT

Page 27: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 27/29

Economics

*&. otel Ran@it; Ne< 3elhi 7+.+% *+.*7 Loss Making

*(. -" 4 -entaur otel 1uhu8each; Mum)ai '' (, Loss Making

*. -"4"ndo okke otelsLtd.#-entaur Ra@gir$

'' .( Profit Making

*%. -" 4 -entaur otel 6ir2ort; Mum)ai

'' 7, Loss Making

*7. "8P -o Ltd ,,.(7 (,.7 Profit Making

*+. =idesh Sanchar NigamLtd.

*( ,7+ Profit Making

,'. Paradee2 Phos2hates Ltd. %& (.%' Loss Making

,#a$

industan Ainc Ltd. * &&( Profit Making

,#)$

industan Ainc Ltd. .+

,

#c$

industan Ainc Ltd. 7.+* ,*,.77

,* Maruti >dyog Ltd. &.* ''' Profit Making

,,. "ndian Petrochemicals * &+'.7& Profit Making

DISINVESTMENT

Page 28: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 28/29

Economics

-or2oration Ltd.

,&. State 0rading -or2orationof "ndia &'

,( MM0- Ltd. '

, 1esso2 B -o Ltd %* 7.7 Loss Making

Grand Total 10257.19

DISINVESTMENT

Page 29: p 1408 Disinvestment

8/12/2019 p 1408 Disinvestment

http://slidepdf.com/reader/full/p-1408-disinvestment 29/29

Economics


Recommended