In a step which may further delay any decision on the sale of Government’s residual stake in Hindustan Zinc ltd (HZl) and Balco, the law Ministry has advised the Mines Ministry to amend the Act under which both the entities were incorporated/nationalised before taking the Parliament’s nod on the matter.
According to official sources, the Mines Ministry sought the law Ministry’s advice for the second time on the matter after it had initially (also on the suggestion of the law Ministry) decided to take Parliament’s nod on selling of the Government’s residual stake in HZl and Balco through auction mode.
Owing to some technicalities, sources said the Mines Ministry had again sought the law Ministry’s advice, which has now suggested that since both the companies were set up by an Act of Parliament and were public sector companies before Vedanta Group bought majority stakes in them, therefore for selling the residual stake, the Act under which they both were incorporated/nationalised during the 1960s, needs to be amended.
Official sources said that with the arrival of the law Ministry’s opinion, the issue may now be sent for Cabinet’s approval (regarding amendment in the required Act), before it is placed before Parliament. Amid all this dilly dallying though, the matter is all set to be further delayed, as already a considerable amount of time has been spent on it with the Government failing to arrive at a specific decision on how to dispose off the residual stake in HZl and Balco.
The Government, which currently holds 29.5 per cent stake in HZl and 49 per cent stake in Balco, is looking at exiting from the two firms in which Anil Agarwal-led Vedanta Group holds majority stake. The Government had sold the controlling stake in these companies between 2001 and 2003. The stake sale is on top of the agenda of the Government, which plans to raise Rs 15,000 crore by way of residual stake sales in the current fiscal.
Since the stake sale of HZl and Balco is long overdue, the Finance Ministry has of the view that the right valuation can be obtained if the stake sale is done through auction. HZl was incorporated in January 1966 as a public sector company, after the erstwhile Metal Corporation of India ltd was nationalised. Balco was incorporated in 1965.
The law Ministry had pointed out earlier that a Supreme Court order of 2003 had stayed disinvestment of HPCl and BPCl, saying they were formed through a statute and required Parliament’s approval and therefore on that basis, has now informed the Mines Ministry that the same is applicable for HZl and Balco also. In January 2012, Vedanta Resources had offered Rs 17,275 crore for buying out the remaining stake of the Government in Hindustan Zinc and Balco. The company’s board had also taken shareholders’ approval in August last year to sweeten the offer by up to 25 per cent to Rs 21,635 crore.
At present, HZl is the richest profit-making subsidiary of Vedanta with a cash equivalent of Rs 19,282 crore as on December 2012. The company had reported a net profit of Rs 5,526 crore and net revenues of Rs 11,405 crore in 2011-12.