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Raising strong objection to the proposed sale of government stake in ITC and L&T held through SUUTI, an RSS body on Thursday sought Prime Minister's intervention in stopping the sell-off, which it said would send wrong signals to investors. Urging Prime Minister Narendra Modi to stop the stake sale in the national interest, RSS-affiliate Swadeshi Jagran Manch (SJM) said, "If carried forward, this decision will have far reaching consequences that go beyond normal disinvestment criterion."
"Recognising the strengths of ITC and L&T, certain vested interests are constantly trying to destabilise and inducing disinvestment in these national champions enabling BAT and other foreign entities to take control of these companies," SJM national co-convener Ashwani Mahajan told PTI.
"Humbly we wish to state that at present there is an atmosphere of hope generated by your able leadership about future growth prospects in the economy. Such a decision to offload shares of premier companies would send wrong signals to the investors that government itself does seem to be confident of its growth story.
"... In national interest, no steps should be taken to jeopardise the stability and long term prospects of these companies. On the contrary the management of the organisations should be encouraged to be the flag bearers of India in the world," he said in his letter to the Prime Minister.
Mahajan said ITC and L&T are India's national champions and are in the process of building brands and capabilities for the future, which match international quality and standards.
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He added that these corporations while leveraging their intellectual capital and capabilities, are poised to become international players and will be valuable foreign exchange earners through royalties and technical fees.
"This decision of the government has perturbed all the nationalists...Even a slight change in the holding pattern of shares of these companies would lead to a destabilisation in management or even shift of management to foreign entities," the SJM said.
Mahajan said past experience clearly shows that with the change in management from Indian to foreign nationals or other entities, the entire nature, working and objectives of the companies change altogether.
"The thrust shifts to maximising profits by increasing import intensity that increases outflow of money, directly affecting the country's Forex reserves,"he said.
Government is planning to sell its stake, held through special purpose vehicle SUUTI, in conglomerate ITC, engineering giant Larsen & Toubro and Axis Bank.
It holds 11.53 per cent in Axis Bank, 11.17 per cent in ITC and 8.16 per cent in Larsen & Toubro. A complete stake sale in these three companies could fetch over Rs 60,000 crore to the exchequer.
The RSS affiliate had earlier too criticised some economic policies, including on FDI, of the government.
The SJM said as per newspaper reports, the government has
gone ahead and appointed merchant bankers to divest minority stakes held in listed and unlisted companies held by the Specified Undertaking of the Unit Trust of India (SUUTI).
He said these two companies are premier companies earning huge profits, doing enormous value addition and contributing greatly to the exchequer and are contributing directly or indirectly toward the economic growth of our country.
Mahajan said past experience clearly tells us that with the change in management from Indian to foreign nationals or other entities, the entire nature, working and objectives of the companies change altogether.
"The thrust shifts to maximising profits by increasing import intensity that increases outflow of money, directly affecting the country's Forex reserves.
"In addition, it would also have a negative impact on the morale of Indian entities, fearing that even profit making and well performing units are no longer immune to sell-offs," he said.
Mahajan said while in ITC, "domestic institutions hold 32 per cent of shares and BAT's group companies (foreign entity) hold 29.99 per cent".
He said "in case Government sells its SUUTI holdings of ITC shares, even to general public, BAT would become the dominant shareholder and the company will go into the hands of foreign management, and for all practical purposes, become a foreign company, which at present is an Indian company with an Indian soul".
On Larsen and Toubro, a premier infrastructure company having significant exposes in defence productions, he said, "Offloading of SUUTI shares to any player, or acquisition of these shares, along with shares held by general public, the present management would be destabilised." Other parties hold 21.52 per cent share, even as general public holding is 24.40 per cent in L&T.
SJM also raised concerns over the royalty outflow in the form of precious foreign exchange to the tune of thousands of crores in the next few years in case the stake is sold.
Mahajan said if ITC goes into hands of MNCs, as per the existing rules with regards to transfer of royalty payments to foreign masters, the total amount of money transferred abroad would be at least Rs 1,289 crore per annum; and as per the projections of sales, by the company in 2016-17, royalty outflow would be Rs 1,624 crore which in next five years would cumulate to Rs 10,511 crore.
"Apart from this, the government would lose dividend income of over Rs 4,000 crore over the next five years," he said.