The Government intends to introduce electronic auction and change the bidding procedure for strategic or outright sale of Central public sector undertakings. This will replace the age-old paper-based tender system.
The Core Group of Secretaries, headed by the Cabinet Secretary, discussed the new mechanism last week. It is believed that the matter will now be placed before the Cabinet Committee on Economic Affairs (CCEA).
Tyre Corporation of India is set to become the first company where this system will be used. When introduced, there will be a change in the bidding process as well. No strategic or outright sale has taken place since 2004-05.
A senior Government official told
With the adoption of e-auction, the bidder will get information about reserve/floor price before he places the financial bid, the official added. It is different from paper-based tender method, where the reserve price is determined only after receipt of the financial bids.
However, the official admitted, there is an apprehension of getting lower value. In case a bidder values the company at a price much higher than the floor price, he may be dissuaded from submitting the higher bid, which he would have quoted in the case of the tender method. But the official clarified that this will be curbed if the company has good fundamentals and prospects.
At the same time, there is also a proposal to appoint two more intermediaries, an e-auctioneer and an IT auditor. The first will manage the e-auction process, while the second will audit the e-auction of the auctioneer to ensure that it is free from any possible bias.
Parliament approved the Tyre Corporation of India Ltd (Disinvestment of Ownership) Bill 2007 to accord sanction. Subsequently, the CCEA, on November 6, 2008, approved the outright sale.
In its meeting on August 21, an Inter-Ministerial Group (IMG) suggested the e-auction method. After the date for submitting the ‘expression of interest’ was extended till September 10, three parties have put in their bids. Now, the IMG is in the process of firming up the draft sale document.