The Hindu Business Line : Govt plans to offload 10 pc Nalco stake through ADR/GDRs

AFTER biting dust with its bid to go ahead with the disinvestment of Bharat Heavy Electricals Ltd (BHEL), the Government is now planning the disinvestment of another profitable public sector undertaking, National Aluminium Company Ltd (Nalco) that was put on hold by the erstwhile National Democratic Alliance (NDA) Government.

However, sources in the Department of Disinvestment (DoD) told Business Line that this time the plan was totally different from what was earlier proposed. This time, the proposal is for funds to be raised abroad for ploughing back to the company itself to enable Nalco to go in for overseas expansion. The money would not go to the Government.

According to the plan being considered by the DoD and suggested by the Ministry of Mines, the Administrative Ministry for Nalco, 10 per cent Government stake in Nalco would be offloaded through the ADR/GDR route.

"The funds so raised would be utilised by Nalco for setting up a smelter plant somewhere in West Asia near a source of perennially available cheap power and closer to the company's foreign markets," sources said.

The aim is to attain an integration of operation spread over different geographical locations to capitalise on the comparative advantages.

According to the plan, the aluminium major would mine bauxite in India and set up a refinery somewhere in the western coast from where it would send the alumina to its smelter in West Asia to serve its global customers, sources said.

Sources pointed out that while the National Common Minimum Programme (NCMP) mentions that profitable PSUs would not be divested, the Left allies of the present United Progressive Alliance (UPA) Government had indicated that they would not have objections, if PSUs themselves feel it necessary to raise funds for their own requirements. They said that this was communicated to the Congress leadership during the meeting with the Left allies during the recent controversy over BHEL disinvestment.

The Government view is further supported by Nalco, which has told the Government that putting up additional aluminium smelter capacity in the country was not financially feasible because the cost of power was prohibitive and there were issues regarding availability of coal for captive power plants. It may be noted that during 2005-06 the power sector alone is facing a shortfall of around 12 million tonnes of coal, out of a total shortfall of 40 mt and according to estimates for next fiscal, the shortfall for power sector would be to the tune of 30-35 mt out of a total shortfall of around 60 mt.

Officials pointed out that post-ADR/GDR, Government stake in Nalco would come down from 87.15 per cent to 77.15 per cent, thus, retaining more than the strategic 74 per cent stake required to get special resolutions passed by the company's board.

Analysts, however, feel that the Nalco ADR/GDR issue proposal was "unusual" as it would be difficult to channelise money into the company by-passing the exchequer if the Government offloads its stake.

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