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| Balco residual stake sale on fast track |
| Abhineet Kumar / Mumbai Jul 03, 2009, 00:30 IST |
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The three-judge arbitration panel set up to resolve the controversy over the sale of the government’s residual 49 per cent stake in Sterlite-controlled Bharat Aluminium Company Ltd (Balco) has decided to meet in August, raising hopes of a resolution to the five-year-old dispute.
Sterlite, a subsidiary of London-listed Vedanta, bought 51 per cent in Balco in March 2001 for Rs 552 crore when the National Democratic Alliance (NDA) government decided to divest the government’s stake in the public sector company. Sterlite owned the right to buy the remaining stake in the aluminium producer after a three-year embargo, but ran into differences with the government over valuation.
“The long-standing dispute is likely to end as the government is keen to in encash its stake more than ever to bridge its fiscal deficit,” said a person familiar with the development. “In fact, the absence of Left parties is likely to speed up the arbitration proceedings now,” he added.
After the embargo expired in March 2004, Sterlite sent the government a call notice and a cheque of Rs 1,099 crore to acquire the 49 per cent stake in Balco, in accordance with the shareholders’ agreement.
However, differences in the value of the government’s residual stake cropped up after the United Progressive Alliance (UPA) came to power in May 2004 and the issue was referred to the Comptroller and Auditor General.
In 2006, Sterlite moved the Delhi High Court following the Comptroller and Auditor General report that pegged the value of the residual share much higher than what Sterlite had offered.
In the same year, the court asked Sterlite and the government to settle the matter amicably, through conciliation or to go in for arbitration.
The government accordingly directed a committee of secretaries to explore ways to reconcile the issue.
In May last year, the committee of secretaries recommended that to discover the correct price of the stake in the unlisted company, the government should sell 10 per cent in an initial public offer (IPO). In July, the Cabinet Committee on Economic Affairs (CCEA) approved the IPO after the UPA parted ways with the Left parties which had supported it in the Lok Sabha. Sterlite, however, rejected the IPO on the ground that it holds the right to buy the residual stake, after which the dispute then went to arbitration early this year.
If the arbitration fails, the case may be settled before a Supreme Court bench.
Sterlite declined to comment, but in a report last week Pradeep Mahtani, an analyst with Citi Group Global Markets, predicted that the acquisition of Balco's minority stake would be settled in three to five months.
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