Disinvestment In India

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 court’s 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.

II

INSTITUTIONAL SUPPORT FOR PRIVATIZATION

Commencing from the report of the Disinvestment Commission in

1997, the tortuous process culminated in the landmark judgment of