Govt can retake SCI control at half price

The Union government is planning to insert a unique clause in the Shipping Corporation of India's (SCI) shareholders' agreement.

The clause says if the government is not satisfied with the successful bidder's declared source of funding, it can buy back the stake at a 50 per cent discount.

Simply put, if the government offloads its stake to a company for Rs 100 crore, it can buy it back at Rs 50 crore if it is not satisfied about the source of funding of the original transaction.

"The government is at present discussing this clause with prospective bidders and has not taken a final decision on it," sources close to the SCI disinvestment process said.

The government's move has been prompted by security considerations. SCI owns 40 per cent of India's mercantile fleet and the government is chary of the corporation falling into dubious hands.

The decision to disinvest in SCI was preceded by a debate on security. The government finally decided to go ahead with the privatisation but decided to add a rider in the SCI bid documents "" it can, on security considerations, take over the management of the corporation even after divestment.

The government has decided to offload a 51 per cent stake in SCI to a strategic partner, which will then have to make an open offer for another 20 per cent.

Three companies are in the fray for the government's stake in SCI "" Essar Shipping, the Sterlite group and Videocon. Japan's K-Line pulled out after submitting an expression of interest.

This is the second attempt at privatising SCI after the government called off an earlier attempt a few months ago.

At that time, the government had capped foreign investment at 25 per cent. The second time round, this cap has been lifted.