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Friday, Nov 29, 2002

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Ministry seeks stripping Rs 300 cr of EIL reserves

Our Bureau

NEW DELHI, Nov. 28

THE Petroleum Ministry has written to the Disinvestment Ministry seeking stripping of Rs 300 crore from Engineers India Ltd's reserves, prior to its proposed privatisation, according to a top Disinvestment Ministry official. EIL has reserves of Rs 660 crore.

Interestingly, the letter comes shortly after the Disinvestment Secretary, Mr Pradip Baijal, recently stated that EIL might lose value if it was privatised before the strategic sale in the oil companies, since the company registered over 50 per cent of business through negotiated price from the public sector companies.

In this backdrop, the move of the Petroleum Ministry, which has not been a proponent of privatisation, indicates that the Government machinery is working towards sell-off of EIL. Officials also indicated that documentation such as the draft shareholder's agreement was in the final stage of preparation. On November 11, following reports of a potential delay in the sell-off of EIL and its confirmation by Mr Baijal, the stock price dropped 18 per cent from the Rs 270 per share-level to the Rs 220-level.

The Ministry's move is independent of the Finance Ministry's move to extract monies from the oil sector public sector undertakings in the form of higher dividends. The Finance Ministry had earlier informally told the Petroleum Ministry that it was keen on seeking around Rs 2500 crore as additional dividend and it was up to the Petroleum Ministry to decide as to which of the PSUs would fork out the amount.

The stock, which started trading at a low of Rs 75 at the beginning of the year, peaked at Rs 414 on June 17. The Petroleum Ministry had first raised the issue of stripping of reserves in September this year, citing the Cabinet decision on disinvestment of EIL, which stated that the Inter-Ministerial Committee would deal with the issue.

The Cabinet decision on the stripping of reserves was aimed at averting a VSNL-like situation where, post-privatisation, the strategic partner, the Tatas, sought to utilise the free reserves for its other operations.

Till Mr Baijal's statements, it appeared that the EIL sell-off was in the final stages with bids set to be invited following the Petroleum Minister, Mr Ram Naik's agreeing to the privatisation of EIL since it was not "strategic" in nature. EIL was one of the few public sector units that did not suffer in the recent spate of setbacks in the disinvestment process when several political parties led by the National Democratic Front Convenor and Defence Minister, Mr George Fernandes, besides the RSS opposed the sell-off of HPCL and BPCL.

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