146 Disinvestment in India
e Government of India had a 100 per cent stake in BALCO prior
to disinvestment. In 1997, the Disinvestment Commission classi ed
BALCO as non-core for disinvestment purposes and recommended
immediate disinvestment of 40 per cent of the government stake to
a strategic partner, and reduction of government stake to 26 per cent
within two years of the strategic sale, through a domestic public o er-
ing. It further recommended disinvestment of the entire remaining
stake at an appropriate time therea er. e Union Cabinet accepted
the recommendation for disinvestment of 40 per cent through stra-
tegic sale and further disinvestment through the capital market.  e
Disinvestment Commission subsequently revised its recommenda-
tions in 1998 and advised the government to consider 51 per cent
disinvestment in favour of strategic buyer along with transfer of
management, which was accepted by the Union Cabinet.
e strategic sale process came to an end on 2 March 2001 with
51 per cent stake being sold to Sterlite Industries. It fetched the
government Rs 551.50 crore. But this was not the end. A strike
started, the state government opposed privatization, many legal
cases were  led, and there were lengthy debates in the parliament.
A motion was put to the Lok Sabha ‘. . . that this House disapproves
the proposed disinvestment of Bharat Aluminium Company’.  e
motion was defeated. Yet the plant was not allowed to start and the
pots froze, leading to a huge loss to the buyer.
Ultimately, the plant could start with the courts intervention
a er 67 days of strike and the entire controversy was set at rest by
a unanimous three-judge bench judgement of the Supreme Court
on 10 December 2001, clearing the deal on all counts. Regarding
valuation, the court held, ‘Whether the reserve price should have
been 514.4 crore or more appears to be immaterial when the best
price which has been o ered for sale of 51% stake in BALCO a er
global advertisement was only Rs 551.5 crore.
Let us look at the propositions now.
Commencing from the report of the Disinvestment Commission in
1997, the tortuous process culminated in the landmark judgment of

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