After a gap of about 17 months, the proposal to sell residual stake in Hindustan Zinc and Balco is set to gain momentum as the government intends to seek fresh legal opinion on these two erstwhile Central Public Sector Enterprises (CPSEs), which are now owned by Anil Agarwal’s Vedanta Group.
“The plan is to get an opinion from the Attorney General on whether there is need to amend the Metal Corporation (Nationalisation and Miscellaneous provision) Act 1976 or not before divesting the shares,” a senior government official told BusinessLine .
The move comes despite the Cabinet Committee on Economic Affairs (CCEA) in the previous regime clearing the sale in its meeting in January last year.
This will be fourth legal opinion so far, with the latest one in January last year. At that time, the then Attorney General GE Vahanvati opined in favour of selling residual stake in both the companies.
However, there was no clarity on whether there is need to amend the Act. In fact, this issue cropped up during the CCEA’s meeting last year, but was rejected.
HZL and Balco were strategically divested between 2000-01 and 2003-04, with the Vedanta Group buying these companies. At present, the government owns 29.54 per cent in HZL and 49 per cent in Balco.
HZL is a listed company, while Balco is not. Residual stake sale in these two companies can fetch ₹20,000 crore. Interestingly, the Finance Ministry has not mentioned the residual stake sale in the revenue receipts for the current fiscal.
Another official said that though tax collection improved during the first two months of the current fiscal, there are still fresh expenditure requirements, such as more capital for public sector banks and contingency plan in case of deficient rains. “Keeping these incidentals in mind, it will be prudent to explore all possible means to mobilise money,” the official said when asked about the re-initiation to sell residual stake.
The Mines Ministry, the administrative Ministry for these two companies, has already said that residual stake will be sold once the market condition improves. In fact, almost a year ago, the Department of Disinvestment did invite proposals for engagement of valuer for undertaking valuation and assessment of HZL. In July last year, it also invited proposals for fresh valuation and assessment of fair share value of Balco. However, there is no word on the progress made.
The government favours the open auction route for both these companies, under which bids are invited and the highest bidder(s) get shares.
The parent company can also bid for shares, but has to compete with other investors.