Trivial pursuits PDF Print E-mail
Wednesday, 09 October 2013 00:07
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The 2002 Hindustan Zinc stake sale was an open and shut case. CBI trying to re-open it defies logic — and facts.

Is the CBI, probing into a staggering range of irregularities committed under this government's watch, sitting idle? Only excessive time on its hands, or a bumbling attempt to appear politically even-handed, could explain the agency's adventurism to probe the 2002 disinvestment of Hindustan Zinc Limited (HZL) under the NDA government. At a time when the government is trying to sell its residual stake in HZL, the CBI has asked for the "the entire record" pertaining to the disinvestment and "details of officers who were associated" with it. Given the facts of the case, the move raises questions about the agency's priorities, if not its motives.

The ostensible reason for the CBI's investigation is a complaint arguing the HZL valuation was done incorrectly and that since it was formed by an Act of Parliament, it could not be privatised unless Parliament voted on the matter. A Supreme Court verdict on the proposed privatisation of oil PSUs, HPCL and BPCL, is cited, since both were created by Parliament. The charges are easily dealt with, without calling in the CBI. On both, the facts speak for themselves. The SC ruling, laying down that Parliament's consent was required for PSUs set up by an Act, came in after HZL's sale. At the time of the sale, the legal opinion the government had to go on was that parliamentary approval was not needed. Indeed, this is also the opinion it had for the proposed privatisation of HPCL and BPCL, but the SC ruled differently. As for the valuation, since every expert has her own methods, the best route is an open auction, which is what happened in this case.

It is also worth keeping in mind how PSUs can turn around, post-privatisation, and the gains that accrue to the economy as a result, from more taxes, more employment, more extraction of minerals. The converse is equally true, though that loss is rarely taken into account. In HZL's case, the company's share price rose from Rs 1.68 in the year before Sterlite bought it in 2002, to Rs 130.60, taking the company's market valuation from Rs 706 crore to over Rs 55,000 crore, a 78-fold increase. Sales have risen over 10 times and profits 101 times in the last 11 years, while investments rose from minus Rs 3 crore the year Sterlite bought it, to Rs 3,200 crore in 2012-13. By no stretch of the imagination is that a bad deal.


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