Financial Daily from THE HINDU group of publications
Friday, Feb 20, 2004
Industry & Economy
Centaur deal: Shourie denies `under-pricing'
New Delhi , Feb. 19
THE Government on Thursday denied allegations of under-pricing in the sale of Hotel Corporation of India's (HCI) Centaur Hotel property at Mumbai to the AL Batra Group for Rs 83 crore. The Batra Group subsequently sold the property to the Sahara Group.
The CPI(M) on Thursday demanded a CBI probe into the deal, alleging that Rs 145 crore of public funds were squandered away. To buttress its stand, the CPM has referred to a report of the Comptroller and Auditor General (CAG) which had "revealed" a loss of Rs 145.69 crore in revenue due to "under-charging of lease rent and reduction of turnover levy in the sale process."
Addressing a press conference here, the Disinvestment Minister, Mr Arun Shourie, said it was surprising to find the CAG put out a paragraph in its report without sending any observations in this regard to the Disinvestment Ministry for its comments, which was customary.
"The CAG never served us any observations in this regard and we were not asked any questions at all," Mr Shourie said.
Narrating the sequence of events, the Minister said the transaction for the sale of Mumbai Centaur Hotel was first looked after by Air India, which owned HCI. "The disinvestment Ministry was brought in only at the last minute after all the stages were completed and the transaction documents frozen," he said.
The Ministry was called in at the time of receiving the price bids from four qualified interested parties, of which only one party submitted the bid of Rs 65 crore. This bid was rejected by the Cabinet Committee on Disinvestment (CCD) as it was found to be below the reserve price of Rs 76.2 crore.
The Ministry then re-examined the case and altered the sale terms, including a cut in the lease rent from 6 per cent to 2 per cent with the approval of the CCD and re-invited price bids from all the four QIPs instead of the only one who had submitted the price bid in the earlier round.
"The result of the alteration was that instead of Rs 65 crore, the Government got Rs 83 crore. Far from losing money, the Government improved the bid money from Rs 65 crore to Rs 83 crore," the Minister maintained.
The sale terms were changed in a completely transparent manner, which was followed in other cases by the Government.
According to Mr Shourie, the method of calculating notional loss by CAG was a bit puzzling. "As I have said in the past, after a particular transaction is closed, the Ministry would turn over all the papers relating to the deal to CAG. I will again write to CAG for undertaking a concurrent audit," he said.
"But, without any reference, any enquiry, to put out a paragraph like this (in the case of Centaur Hotel) is completely surprising," he stated. "I respect CAG and whatever process they follow. But in this case, we have not had an occasion to bring the facts of the deal to the notice of CAG, for the reason that we were not asked by them. CAG would be so kind to ask us particularly since we were handling the transaction... and we would have given them all the facts," he explained.
The Minister said he would take up the matter with the Cabinet Secretary and CAG to avoid recurrence of such incidences in future.
The Attorney-General had also opined that the re-sale of Hotel Centaur by Batra to Sahara Group did not violate any of the provisions of the Shareholders Agreement in the absence of any lock-in period for the sale of the property purchased by Batra.
Mr Shourie said the CPM had raised the issue to make electoral gains.
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