Now, the Supreme Court order to register a regular case for a full-fledged CBI enquiry in the alleged irregularities in the sale of 26 percent government stake in Hindustan Zinc Limited to NRI Anil Agarwal-promoted Sterlite, a subsidiary of the UK-based Vedanta group, for Rs. 445 crore in 2002, threatens the Narendra Modi government’s ambitious privatisation programme in several public sector enterprises. The Supreme Court noted the fact that the then government brushed aside a critical report on the subject from the Comptroller and Auditor General of India. At that time, the state-owned non-ferrous metal giant Hindustan Zinc’s value was estimated at Rs. 39,000 crore. Allegedly, a proper value of stocks would have been over Rs.1,000 per share though bids were invited at the reserve price of Rs. 32.15.

What seemed to have prompted the Supreme Court bench, comprising justices D. Y. Chandrachud and B. V. Nagarathna, to order a CBI investigation into 18 suspicious grounds is a faulty closure of CBI’s preliminary enquiry despite numerous irregularities having been listed in the sale of the 26 percent government stake in Hindustan Zinc. The government sale helped Sterlite acquire additional shares within a short span to have a controlling stake in the zinc major. Soon after buying the government stake, Sterlite acquired another 20 percent from the market in 2002. The very next year, Sterlite bought another 18.9 percent to become a strong majority shareholder to run the enterprise as its own.

In its 2006 report, CAG indicated that the asset valuer and global adviser did not properly value the asset. “There is a sufficient material …… CBI is directed a regular case and periodically submit status reports to its investigation to this court,” the bench said. Depending on its ultimate findings, the CBI probe may throw open the possibility of similar investigations into alleged under-valued asset sale in some of the most promising public sector enterprises during the Vajpayee era, such as Indian Petrochemicals, Bharat Aluminium, Jessop & Co., Modern Foods and Paradeep Phosphates. The real estate assets under the command of those units were priceless. Some of the private buyers reportedly pocketed huge sums by selling real estate.

Now, it is to be seen how the government, which has already lost face after being forced to repeal the three farm bills earlier this month in the face of sit-in protests by farmers on the Delhi border for almost a year leading to violence and death, pursues its gigantic programme to privatise large public sector enterprises and banks in the context of the latest Supreme Court order and the changing political environment in the country. The Modi government has a much bigger privatisation road map than the Vajpayee government’s.

Though the Vajpayee regime sold nearly a dozen PSUs and joint venture Maruti Udyog in a short time, the present government has been able to offload only one — the heavily bleeding Air India Limited — in favour of the Tatas in the last seven years. It too appeared to be a distress sale. The only other bidder for Air India was a consortium led by SpiceJet chairman Ajay Singh. Tata Sons’ enterprise value bid of Rs.18,000 crore, having a cash component of only Rs.2,700 crore, was higher than the rival bidder’s. The Tatas acquired the giant airline with over 140 planes and 900 slots at overseas airports, including the most valuable London’s Heathrow.

The present BJP-led government, enjoying a massive mandate in Parliament, originally planned to sell over two dozen big-ticket PSUs and banks. Among them are as many as six steel plants, including giant Vizag, Durgapur and Salem plants and Neelachal Ispat Nigam, large oil refiner Bharat Petroleum, biggest sea liner Shipping Corporation and Container Corporation. However, there are few prospective Indian buyers barring maybe NRIs Anil Agarwal of Vedanta and Laxmi Mittal of ArcelorMittal for a few select companies. The proposed sale of Vizag Steel has already come under attack from both the company’s employees and the state government. The NDA administration’s bid to sell some of the state-owned commercial banks is also facing strong opposition from the All-India Bank Employees Association.

Most Indian business houses are in financially tight position now due to the Covid-19 pandemic, which pushed the entire economy back in the negative zone during 2020-21. The business recovery during the current financial year has been impacted by record retail diesel and petrol prices, raising the country’s inflation based on the wholesale price index (WPI) at 12.54 percent in October, this year, compared with 1.31 percent in the corresponding month, last year. Even a distress sale of some of the large PSUs is unlikely to get enthusiastic response from genuine Indian investors and business groups.

The Supreme Court order in the alleged under-valued Hindustan Zinc sale case, the government’s unprecedented decision to suddenly repeal all the three new farm laws, and upcoming elections in as many as seven states, may force the government to go slow on proposed PSU sale to private parties or their front organisations. Of the seven states due for election next year, as many as six are ruled by BJP. These states are: Uttar Pradesh, Gujarat, Himachal Pradesh, Uttarakhand, Manipur and Goa. BJP’s stakes are naturally high. Election prospects for BJP don’t look too bright at least in two of these states. The only other state due for election in 2022 is Punjab, ruled by Congress. Under the circumstances, the Modi government is unlikely to be in a hurry to sell some of the high-value state-owned enterprises cheaply to NRIs or local private bidders. Starved of funds, it may instead try to sell or monetise ‘surplus’ prime lands with some of these enterprises. (IPA Service)