The Congress Government in Karnataka has opposed the Union Government’s decision to strategic disinvestment of Bharath Earth Movers limited (BEMl), a public sector undertaking. In a letter, Chief Minister Siddaramaiah urged the Prime Minister not to disinvest the BEMl which is strategic to country’s security. In his September 28 letter, the CM urged the PM not to sell 26% of Government stake to a private  buyer. He also said the move could undermine national security.

“I urge you to kindly review the decision to disinvest (in) BEMl and let it continue as a CPSE,” the letter said. “I would like to draw your attention to the Budget speech of 1999-2000 of the then NDA Government, wherein a commitment has been made to Parliament that ‘the Government shall not divert strategic CPSEs and the disinvestment will be limited to non-strategic CPSEs”, Siddaramaiah added.

BEMl manufactures important land systems for the Army, besides rail and Metro coaches and mining equipment. Heavy trucks, bridge systems, missile firing support vehicle are its mainstay products. Its nine units employ 8,000 people across the country.

It was in last November based on NITI Aayog’s recommendation Union Government has announced a list of PSUs for disinvestment, which includes the Bengaluru-headquartered BEMl. As per this it will transfer the management control to a future investor from the private sector, leaving the Government with 28% share.  BEMl employees have been opposing the move; BEMl is among 20 PSUs identified by the NITI Aayog for disinvestment.

The experts feel the process of disinvestment in a strategic and profit-making Union Government enterprise would only help private sector investor ending the Government control. Siddaramaiah, who also holds the finance portfolio in the state, said the decision will benefit only private parties at the cost of the public and also undermine national security.

“It is likely to undermine the security of the country,” the letter mentioned and said retaining it in the public sector had more advantages than a stake sale.

After two public issues, the last one in 2007, the Centre owns 54 per cent share in the company. For 2017-18, BEMl made a turnover of over Rs 2,836 crore and a post-tax profit of around Rs 72 crore.

In July, the Government gave an ‘in-principle’ approval to divest 26% stake in favour of a strategic buyer, who would hold management control over it. It said it had appointed a transaction adviser, a legal adviser and an asset valuer. The process would go for specific approval again, it said.

“BEMl with a freehold land of 2,696.63 acres and leasehold land of 1,494.93 acres is a very valuable PSU and cannot be sold to a private sector investor for the sake of achieving the disinvestment target,” Siddaramaiah wrote.

“You should appreciate that investment of strategic and profit making CPSE only leads to private sector investor reaping windfall benefits and profit at the cost of public and is likely to undermine the security of the country,” Siddaramaiah said. “It (BEMl) has been continuously paying an average dividend of Rs 20 crore and taxes of around Rs 600 crore to the exchequer from 2007-08 and earning foreign exchange through export of mining and other equipment to over 52 countries,” he said.

 “In the light of the above facts and circumstances, as advantages of retaining the CPSE in public sector far outweigh the benefits from its sale, I earnestly request you to kindly review the decision to disinvest BEMl and let it continue as a CPSE,” he argued.