Not the right thing to do

Sir, - I disagree with Mr. Rajinder Sachar when he says it will not be beneficial to the Government to sell its stake in Balco. I think both Sterlite Industries and, more importantly, the Government will benefit from the deal.

Balco's evaluation was done by a reputed U.S. firm called Jardine Fleming, in a four-month-long evaluation exercise. The price was determined by the Discounted Cash Flow method where the expected future earnings are discounted at a fixed rate to arrive at the present value. Jardine Fleming evaluated the 51 per cent shares of Balco to be Rs. 551.6 crores (Rs. 412.5 crores plus 25 per cent as control premium). This evaluation was transparent and fair enough.

The Chief Minister, Mr. Ajit Jogi,and his allies say that Balco is worth far more than the Rs. 1,082 crores, as the replacement cost of the 270 MW power plant itself is more than Rs. 1,500 crores. In reality, if the Government tries to sell Balco at its asset price, there would be no buyers at that range - a major player of the aluminium industry, Hindalco offered only Rs. 275 crores for Balco.

With Balco's decreasing profits (from Rs. 79.84 crores in 1997- 98 to Rs. 55.8 crores) and a mere Rs. 18 crores as dividend, it may soon be in the red. Other companies like Hindalco and Nalco are beginning to expand their capacities and Balco will be left behind for two reasons. One, for the simple reason that it has no money to investand two, because investing will be in direct contrast to the Government's idea to disinvest.

Manoj Mathan,

Coonoor

Sir, - The article by Rajinder Sachar places things in the right perspective. The ruckus created by the Congress(I) is a classic example of doublespeak. But it has to be appreciated that a company in a core sector like aluminum, employing 7000 and having a market share of 15 per cent has been handed over to a private player in a clandestine fashion.

There were only two bidders, one of whom quoted a price far below the reserve price of Rs. 551 crores (a very low price considering that the company has reserves and surplus of Rs. 460 crores and assets worth Rs. 1000 to 2000 crores including captive power plants generating over 250 MW). This is anything but competitive bidding as envisaged by `the Disinvestment Commission'. After the takeover of Balco, Sterlite Industries will hold a market shareof about 20 per cent which amounts to holding a monopoly under

the MRTP Act. As pointed out by the author, even capitalist countries like the U.S., the U.K. and other European Union members do not allow this type of monopolies as it is against the principle of free competition.

Besides, it is violative of the provisions of Constitution which prohibit the transfer of land in a scheduled tribal area to non- tribals. The State of Chhatisgarh is well within its rights to cancel the lease.

Sunil Arora,

New Delhi

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