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After years of not being able to sell its residual stake in Anil Agarwal-promoted Hindustan Zinc and Balco, the central government is once again pushing for a resolution to the matter and hopes a proposed amendment in the Prevention of Corruption Act (PoCA) will help it convince the Supreme Court to allow the exchequer to offload the stake and raise around Rs 20,000 crore, likely this financial year.
With an expected reverse-merger of Hindustan Zinc and Balco with Vedanta Ltd (formerly Sesa Sterlite) on the cards, the Finance Ministry is keen to sell its remaining 29.5 per cent stake in Hindustan Zinc and 49 per cent stake in Balco. The majority stake in these erstwhile state-owned companies was sold to Vedanta in 2002-03.
“HZL and Balco will likely merge with parent company Vedanta after the Vendanta Resources-Cairn merger. The government does not want to be a part of any such deal. We are pushing to sell the residual stake in the two companies this year,” a senior government official told Business Standard. The person added that the Centre may look to oppose any HZL-Balco-Vedanta merger, as it has done in the past, till it can get out of the two entities
The government has been trying to offload the remaining stake in HZL-Balco for a number of years now. It was even a part of the 2013-14 and 2014-15 disinvestment budgeted estimates. It is officially not part of this fiscal’s disinvestment plans
The HZL case is stuck in the Supreme Court after a body called the National Confederation of Officers’ Associations of Central Public Sector Undertakings filed a PIL last year challenging the proposed disinvestment, saying the decision was “irrational, illogical, illegal, unreasonable, malafide and arbitrary”.
Meanwhile the Central Bureau of Investigation (CBI) is looking into suspected irregularities in the original 2002 stake sale of HZL to Vedanta. Balco, meanwhile has been stuck as there have been some difficulties in valuing the Centre’s stake in the unlisted company.
The government hopes to table and clear the proposed amendments in the Prevention of Corruption Act in the upcoming monsoon session of Parliament. One of the amendments seeks to differentiate between an act of corruption committed knowingly, or “intentional enrichment”, and any irregularity committed unknowingly or without malafide intent.
“If such an amendment is passed in Parliament, the centre can make a representation to the Honorable Supreme Court that the proposed HZL stake sale is for the purpose of garnering much-needed revenue for the exchequer and has not been taken with any intent of intentional enrichment,” the official quoted above said.
The person said that the same argument would apply to the 2002-03 stake sale, which was carried out as part of that fiscal’s disinvestment programme and was without malafide intent. The Centre would thus, seek an end to the CBI investigation.
Finance Minister Arun Jaitley has spoken on a number of occasions to revisit and revise PoCA, saying that the Act, which was formulated before the liberalisation of 1991, was out of touch with today’s bureaucratic decision-making.
“Can that decision-making be where every decision-maker is always on the defensive, cautious of what may eventually happen if a decision is taken one way? Economic decision-making can also be trial and error, it may also involve an element of risk taking. Does the 1988 Act adequately distinguish between an act of corruption and an act where a decision-maker makes an honest error? I think that Act fails that test,” Jaitley had said at an event in April.
The budgeted disinvestment target for the year is Rs 69,500 crore, out of which Rs 41,000 crore is expected to come from minority stake sales in listed PSUs, and Rs 28,500 is expected from strategic sale in unviable government assets. Although not part of this year's plans, the HZL-Balco residual stake sale could fetch more than Rs 20,000 crore and go a long way in meeting the ambitious target.
