The Hindu Business Line : Not persuasive enough

GOING PURELY BY the record of evidence presented, the Comptroller and Auditor General of Indiadoes not quite make out a persuasive case of financial wrong-doing in the sale of Centaur Hotel properties belonging to the Government, as the CAG report strongly hints at.

Take the argument that the sale of two properties that were sold managed to attract just a solitary bidder each. It does seem strange that the sale, which initially attracted some 20 bidders, should see a number of them withdraw and all but one of those that remained ended up being disqualified. But that by itself would not make for a conclusive case of an improper execution of the sale. For, if the absence of multiple bidders were to be regarded as a disqualification in a public tendering process, there is a danger of disruption of public provision of goods and services. It is not uncommon for governments to award contracts on a nomination basis or to the solitary bidder who responded to a tendering process. Are such contracts to be tainted with the suspicion of financial impropriety? Neither the presence of multiple bidders a proof of integrity of the process, nor its absence an evidence of the opposite. It is another matter that the policy of disinvestment of government stake in public enterprises may be flawed as many critics allege. But it cannot be denied the erstwhile NDA Government had a mandate to rule and, by extension, had the freedom to set an agenda of governance that it deemed fit.

On the question of fixing the reserve price too, the CAG criticism appears misconceived. It has faulted the Government for setting the reserve price at the upper end of the range of values arrived at by different valuers. Given the subjective nature of the assumptions about operational parameters, widely differing estimates of the value of the asset are possible. But the function of the `reserve price' is not to arrive at the true value of the asset being sold but to merely offer a guidepost to the government. The true value is what the bidders are willing to pay. Viewed thus, a case could well be made for setting the reserve price at the lower end. As for the argument that the Government should have sought an explanation from the bidders who had withdrawn after expressing initial interest, it is not clear what canbe achieved by this exercise. Anyway what could the Government have done if they had said that they were no longer interested in the hotel business or that they wished to pursue business opportunities elsewhere. To participate in the tendering process or withdraw from it is a business decision that parties must be free to choose. The Government's responsibility must end with setting a security deposit condition that is neither too low as to attract frivolous bids nor too high as to deter serious candidates.

The CAG must realise that whatever it lays down as desirable conditions would have implications that go beyond the immediate and influence future behaviour of the Executive authority engaged in the administration of public contracts. Its recommendations must, therefore, be sensitive to the operational requirements. Unfortunately, its findings in the instant case, fail that test.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Not persuasive enough

Two emerging giants: The global debate

Why doing business on French soil is difficult

A Salvo on Chapra

Small hydro-power projects — The SPV model can be electrifying

There may be no virtue in portfolio diversification

Movement in WTO negotiations

Power failures

Energy security