New Delhi, Aug 31 (IANS) The government Thursday decided to stall the sale of its remaining stake in Bharat Aluminium Company (Balco) to Sterlite Industries following a Comptroller and Auditor General (CAG) report that the sale of government equity in several public sector firms had been undervalued.
The Cabinet Committee on Economic Affairs (CCEA) decided to return the cheque of Rs.10.99 billion ($236 million) paid by strategic partner Sterlite for buying the remaining 49 percent government stake in Bharat Aluminium Company (Balco).
'The CCEA has decided the cheque of Rs.10.99 billion will be returned to Sterlite while a committee of secretaries headed by the law secretary and comprising of the disinvestment secretary and mines secretary and overlooked by the cabinet secretary will go into the issue,' Information and Broadcasting Minister Priya Ranjan Dasmunsi told media.
In March 2001, Sterlite Industries had acquired a 51 percent stake in Balco for Rs.5.52 billion at a share price of Rs.49.01 with the government deciding to sell off its stake in the aluminium company in two phases.
As per the shareholders' agreement, Sterlite was entitled to buy the remaining stake at a price to be decided through a valuation of Balco's shares.
In March 2004, on expiry of the lock-in period Sterlite sent a call notice for acquiring the remaining 49 percent shares of Balco along with a cheque of Rs.10.99 billion.
With the change of government in May 2004, the matter has been held up on the grounds that revaluation has to be done.
Following the CAG report earlier this year pegging the value of the residual share much higher than what Sterlite had put, the government opted for a legal opinion on the matter and the deal ran into trouble.
With no resolution in sight, Sterlite moved Delhi High Court alleging breach of contract. The court then asked Sterlite and the government to settle the matter amicably through a process of arbitration and reconciliation.
A committee of secretaries had recommended refund to Sterlite of the cheque of Rs.10.99 billion including Rs.2.56 billion interest, since the sale was to be completed in 2004 itself.
Dasmunsi said the committee of secretaries would now strive for arbitration and reconciliation as directed by the high court.
'This matter will be negotiated in the light of the CAG report on the price and valuation done on the date of the share transfer (in March 2001),' the minister said.
'After disposing of the matter, the committee of secretaries would report back to the CCEA on the price negotiation.'
The arbitration process in the court would be resumed after further a CCEA decision, he stated.