The Hindu Business Line : Divestment process

The Government seems to have decided in favour of disinvesting through offer of shares to public rather than through the strategic sale route. Which one is the better course?

Vanaja Prakash, Georgia, US

The strategic sale route to my mind is the better course because not only will it get more money for the government but also result in the management passing into efficient hands. The sale of majority interest in BALCO to the Sterilite Industries has admittedly resulted in better and fuller utilisation of precious resources of the country.

But then the strategic sale route also lends itself to accusation of favouritism being levelled against the government of the day.

When 51 per cent of shares in BALCO were sold to Sterilite, the lone bidder, for Rs 550 crore, there were accusations that the bidding process was a farce even though it was not the fault of the government that only one bidder evinced interest.

At any rate, there is always room for disgruntlement may be on the ground that the bids do not reflect the intrinsic value of the assets of the company sold.

The UPA Government presumably has decided in favour of public offer not only to pre-empt criticism on grounds of favouritism but also to maintain and foster its aam aadmi image — the national assets are going back to the people.

It is another matter that strategic sale has the potential to get more for the exchequer if the disinvestment is properly marketed and the new suitor is eminently suited to take the business forward.

S. MURLIDHARAN

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