CAG flays NDA govt divestments

Criticising the NDA government for undervaluing nine public sector undertakings disinvested between 1999-2003, the Comptroller and Auditor General (CAG) has said low valuations affected the reserve price for the bids.

"Audit examination has revealed instances of far too conservative assumptions made by the global advisors in seven of the nine PSUs. The assumptions had the potential of adversely impacting the business valuation, based on which the reserve price was fixed for disinvestment," a CAG report tabled in Parliament today said.

The nine PSUs include Modern Food Industries, Balco, Hindustan Teleprinters, CMC, Hindustan Zinc, VSNL, Indo-Burma Petroleum, Paradeep Phosphates and IPCL.

According to the CAG, there were inconsistencies in computing the equity value of the companies disinvested. The methodology followed for asset valuation did not appear to be beneficial as the valuation was done without adequately considering all properties, it said.

The report said that certain core assets like leasehold land and plant and machinery in the case of Modern Foods, and leasehold land housing the plant and township for Balco were not valued under the asset valuation methodology.

The CAG pointed out that Balco, VSNL, Paradeep Phosphates and IPCL did not possess a clear title to the entire real estate in their possession. This, it said, would have made it impossible for the value of the assets to be accounted for while fixing the reserve price.

The report also pointed out that a delay in demerging 773.13 acre surplus land of VSNL has not been carried out till date though the company was sold way back in 2002.

"In case of CMC, PPL, IPCL, IBP and Modern Foods, the government had put options while in Balco and VSNL the strategic partners had a call option. In case of Hindustan Teleprinters, no such option was incorporated," the CAG said.