By: Dr. Gyan Pathak
Shelving of the disinvestment programme of the Public Sector Undertaking (PSU) the Pawan Hans Helicopters Limited (PHHL) soon after postponing planned disinvestment programme for another PSU the Central Electronics Limited (CEL) has brought the national attention not only to re-examine the merits and demerits of the Modi government’s overall disinvestment programme, but to find out the real intention behind it apart from the competency of the government officials dealing with the matter.
In both the cases, the government decisions of acceptance of the bids ran into rough weathers because the officials decided in favour of incompetent companies. Had there not legal obstacles, allegations of selling cheap, and some serious ethical questions raised against the dealings, Modi government would have sold both the companies. It is a matter of serious concern for the economy, since the Centre has drawn up an ambitious privatisation programme signalling a major shift in its policy towards PSUs backing for a greater role for private sector.
Not only that, Modi government had time and again reiterated its commitment to follow “stringent due diligence” and proper “valuation of all such transactions”. Now the entire episode of putting on hold the disinvestment programmes for PHHL and CEL shows that there were neither any stringent due diligence, nor proper valuation of the assets of the companies in question. Moreover, the government has also vowed to back civil servants who oversee such transaction, which cause suspicions about the real intentions of the government as well as certain group active behind the shady deals, that the Centre has now been enforced to put on hold or not to follow for now.
Modi government has to put on hold the sale of Pawan Hans because of an order of the National Company Law Tribunal (NCLT) order against Almas Global, which is the biggest shareholder in the winning consortium. It was only last month; the government had selected Star9 Mobility Private Limited, a consortium of Big Charter Private Limited, Maharaja Aviation Private Limited and Almas Global Opportunity Fund SPC, as the winning bidder. Star9 and Almas Global hold 49 per cent share in Special Purpose Vehicle (SPV) while Big Charter and Maharaja Aviation own 26 and 25 per cent respectively.
The NCLT order has in reality either exposed the competence of the government to even scrutinize the biding parties involved, or their complicity with them in the sale of national properties and damn cheap price. The NCLT had passed an order last month reportedly after Almas Global failed to make payments under the bankruptcy law to creditors of a Kolkata-based company under an approved resolution plan. The question arises here as to why Modi government should accept such a incompetent and defaulting company? A company facing conviction has to be disqualified according to rules. The matter should be thoroughly investigated.
Pawan Hans is a 51:49 joint venture of the Union government and the ONGC. In December 2021, three bids were received by the government. Star9 Mobility had quoted Rs 211.14 crore which was above the Reserve Price of Rs 199.92 crore fixed by the government on the basis of valuation carried out by the transaction adviser and asset valuer. The other two bids were for Rs 181.05 crore and Rs 153.15 crore. Without Almas, the other two members of the consortium do not meet the Rs 300 crore minimum net worth criteria for PHHL winning bidder as they are both loss-making. Now, after the NCLT order, the government says that they would do a legal examination of the NCLT order before proceeding further. Letter of Award has not been issued, and official said. There had been several unsuccessful attempts in the past to privatise this company in the past.
This is the second strategic disinvestment put on hold after the sale of CEL that was stalled on account of certain allegations against the winning bidder; the chief among them is its lack of experience in running such ventures. It was only a few months ago in November 2021, when Modi government had approved the highest price bid of Rs 210 crore by Delhi-based Nandal Finance and Leasing Private Limited for the sale of 100 per cent equity shareholding in the CEL.
It is worth mentioning here that after the Cabinet Committee on Economic Affairs (CCEA) empowered Alternative Mechanism (AM) had approved the sale to the said company, the employees’ union had moved court alleging undervaluation.
The Union Minister of State for Finance Bhagwat Kishanrao Karad had informed the Parliament of India in February, “The Letter of Intent (LoI) has not been issued to the successful bidder and put on hold pending examination of specific allegation regarding the bidder.”
The failure of these two privatisation moves should also be taken in context of other moves to know the fate of disinvestment programmes of the Modi government. It has also put the sale of BPCL on the backburner and there are also doubts regarding transactions related to Shipping Corporation of India (SCI), Concor, BEML, and IDBI bank. The merit of the successfully steering the listing of LIC is still being debated, especially because its stiff opposition by the opposition and employees unions, and also due to choppy market conditions. Modi government has so far been able to raise Rs 3,059 crore as against the target of Rs 65,000 crore in 2022-23 from sale of PSUs. (IPA Service)