Financial Daily from THE HINDU group of publications
Monday, Feb 18, 2002
Industry & Economy
Govt to offer unlimited eco indemnity to Hind Zinc bidders
NEW DELHI, Feb. 17
THE Union Government is set to provide unlimited environment indemnity to the bidders keen on acquiring 26 per cent of its equity in the profit-making Hindustan Zinc Ltd (HZL).
"We are agreeable to the demand made by some of the bidders to provide unlimited indemnity against losses arising out of environment issues," Government sources said.
As per this clause, the Union Government would fully indemnify the strategic partner against losses incurred by the company due to environmental issues.
However, the Government will assume unlimited environment indemnity provided that the liability arose out of actions done during the period when the company was in the public sector, the sources said.
Thus, if the environment liability arose after the company was transferred to the private sector, it becomes the responsibility of the new owner.
Similarly, the Government has stipulated that all claims on account of losses connected with environmental issues should be made within three years from the date of transfer of the company to a private investor. "The Government will not entertain claims for an indefinite period," the sources said.
The unlimited environment indemnity was one of the major demands put forward by the bidders when the Government went through with the deal last year. They had also demanded that there should not be any time frame for making the claims. The Government had not concurred with their demands then.
The deal fell through since the lone bid submitted by Sterlite Industries Ltd was below the reserve price set by the Government.
Subsequently, the Government had appointed a reputed Australian firm to carry out environment audit of the company.
The changes in the environment indemnity clause is being made on the basis of the report submitted by the Australian firm and this would be incorporated in the revised draft of the shareholders' pact for HZL deal, the sources said.
The Union Government has also agreed to the bidders' demand to pledge or mortgage the shares acquired from it as collaterals with banks and financial institutions for the purpose of raising funds for various activities of the company.
This will again be subject to the strategic partner seeking the approval of the Union Government. "He will have to inform us about the purpose for which such mortgage is made and the entity with whom the shares are pledged to raise funds," the sources said. The revised draft of the shareholders' pact for HZL disinvestment incorporating the above key changes will be submitted to the Cabinet Committee on Disinvestment (CCD) for its approval.
The Government will soon revisit the HZL disinvestment process by inviting fresh price bids from all the six bidders who were in the fray during the first round of bidding.
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