The Hindu Business Line : Balco issue: Govt bracing up to meet Sterlite challenge

The Balco disinvestment issue has taken a new twist last week with the Sterlite group threatening to pull the Government to court on charges of breach of contract.

The company has served a notice to the Government charging breach of contract with regard to selling of residual 49 per cent stake in Balco held by the Ministry of Mines in favour of the strategic partner Sterlite Industries.

The Government, however, seems to be unperturbed. Stating that the notice had been received, officials said: "it is not a big concern at the moment. We had already obtained the Attorney General's (AG) opinion much ahead of the strategic partner serving the notice."

Official sources in the Government told Business Line that the Ministry of Mines would be taking up the matter with the Ministry of Law next week to determine the legal stand on the issue.

If the Law Ministry's opinion matches with the AG's opinion, which suggested against the selling, then the Government would be able to take a strong stand.

Officials, however, do not rule out a political solution to the Balco imbroglio since right from the beginning the deal was mired in controversies.

Also, the Left parties have already started opposing the move and would be strengthened by the AG's opinion against the sale, they said.

Balco disinvestment was the first major disinvestment decision implemented by the erstwhile NDA Government. Fifty-one per cent stake in the company was sold to Sterlite Industries for Rs 551.50 crore on March 2, 2001.

Now for the remaining 49 per cent the valuation arrived at by SBI Capital Markets is Rs 842.52 crore.

There are serious differences within the Government regarding complete sell out of Balco to the Anil Aggarwal-controlled Sterlite group although as per the shareholders agreement the Government was legally bound to complete the transaction by March 2004.

A section of senior Ministers are clearly in favour of sale through a public issue rather than a negotiated settlement with Sterlite, sources said.

After the Ministry of Mines obtains the opinion of the Law Ministry, it would be placed before the Committee of Secretaries following which it would be forwarded to the Cabinet Secretariat for consideration of the Cabinet.

It would be at that stage where the future course of action would be decided upon, officials said.

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