Govt. clears AI shareholders pact

By Our Special Correspondent

NEW DELHI, JULY 4. The Government today cleared the decks for disinvestment of Air India by approving a shareholders' and share purchase agreement for the airline laying down stringent security guidelines for the proposed strategic partner. It also approved an employees stock option plan (ESOP) for Air India employees providing for sale of ten per cent of the company's shares at par.

Disclosing this here after two rounds of meetings today by the Cabinet Committee on Disinvestment, the Disinvestment Minister, Mr. Arun Shourie, said the other public sector companies taken up today included the India Tourism Development Corporation (ITDC), the Computer Maintenance Corporation (CMC), IBP and Balmer Lawrie, Hindustan Teleprinters Limited and Hindustan Zinc Limited (HZL).

On the controversial Air India disinvestment, Mr. Shourie said the decisions were unanimous and discussions were in a ``constructive spirit.'' He denied any differences among the CCD members. Giving details relating to security provisions in the shareholders agreement, he said no person considered by the Home Ministry to be a security risk would be allowed to acquire a controlling interest in the company. Transfer of shares would not be allowed to competitors or any entities considered as a security threat. Besides, in case the Home Ministry considers the strategic partner has taken steps affecting the country's security, equity will have to be re-sold to the government at 50 per cent of the original cost.

Other provisions in the agreement are that two-thirds of the board members as well as the chairman and managing director must always be Indian nationals. In addition, the government will have the right to ask about the source of funds of the strategic partner and any wrong information will be considered an exceptional case of default.

On the ESOP for AI employees, he said shares will be sold at Rs. 10 each, thus ensuring considerable profits for the workers. Each employee is expected to be get 850 shares, about ten per cent of the total equity. In this context, he said currently AI has a debt of Rs. 2350 crores and has begun borrowing for working capital needs.

The guidelines for selection of global advisors and bidders for AI disinvestment will be taken up on July 6 by the CCD. Subsequently, the Cabinet Committee on Security will meet to examine the bidders in the light of these guidelines.

As for other disinvestment proposals, he said it has been decided to delink the process for the oil sector companies, IBP and Balmer Lawrie as the latter is currently an IBP subsidiary. In the case of ITDC, it has been decided to create shell companies to deal with the sale 22 hotels owned by the company and four under lease. This will enable the sale of these hotels to be carried out individually to different parties.

Mr. Shourie said the draft shareholders' agreement for CMC and HTL were also approved. The issue of creation of monopoly in the zinc industry was taken up as Binani Zinc's bid for Hindustan Zinc Limited (HZL) would create market dominance by a single company. The CCD, however, decided to allow the Binani bid in line with the new Competition Bill which states that abuse of market dominance is to be dealt with rather than the dominance itself.

The Minister also expressed concern over print and electronic media reports during the day about deferring the process as well as differences within the CCD over the disinvestment process. He said the CCD held two meetings during the day due to the Prime Minister's crowded agenda and all items slated for discussions were cleared ``unanimously.''

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