The Hindu Business Line : Balco bungling

That even five years after a strategic partner was brought on board for Balco the Government is yet to complete the process of exiting completely from the venture is neither a good advertisement for the quality of decision-making by the UPA Government nor a demonstration of its commitment to preserving the sanctity of contracts entered into by its predecessor. Consequently, the nation is witness to an absurd situation where the Government receives a cheque for as much as Rs 1,000 crore but claims that it has neither accepted nor encashed it. If the Government thought that Sterlite Industries, the strategic investor, is not entitled, at this point in time or ever, to acquire the residual stake held by it in terms of the shareholder agreement, then it should have refused the instrument tendered.

The offices of the government are not cloakrooms where people can leave valuables for safekeeping. On the other hand, if the Government is in breach of the agreement entered into by its predecessor — as the events leading up to the present situation suggest — not cashing the tendered cheque is poor financial management. After all, its case in a judicial forum would stand by what the shareholder agreement commits it to do rather than what it has chosen to do with the instrument of payment. In a worst case scenario, the Government might well have to settle for a price based on the current valuation, notwithstanding that the enterprise value may have appreciated by the time the issue is judicially disposed of while denying itself the privilege of putting the money to some gainful public purpose. The present Government may have some genuine reservations with the earlier policy of offloading stake in public enterprises. Or, the compulsion of coalition politics may be staying the Government's hand. But it cannot be denied that the previous government had the popular mandate to do what it did and, hence, contracts lawfully entered into must be honoured, unless there are grounds to believe that that the process was vitiated by some malfeasance.

The UPA Government has deferred a decision on the subject by choosing to refer the matter to the Cabinet Committee on Economic Affairs. This is a grotesque distortion of the established principles of separation of operational and policy-making responsibilities. The decision to sell stake or not could be a policy matter. The decision to engage an investment banker to do the valuation or do it in-house might have its own policy dimensions. But how can the CCEA come to an alternative conclusion as to the value of the enterprise than the one proposed by a professional valuer? Clearly, the intention seems to be to defer a decision on the subject through the time honoured device of proposing another round of valuation.

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