After months of deliberations, the government on Monday decided to sell its residual stake of 29.5 per cent in Hindustan Zinc Limited, a Vedanta Group company, which could fetch the exchequer about Rs 17,000 crore.
However, the government is learnt to have deferred its decision on selling 49 per cent stake in Balco, which could have enriched the exchequer by over Rs 3,500 crore. The Cabinet Committee on Economic Affairs (CCEA), which met under the chairmanship of Prime Minister Manmohan Singh, today vetted the mines ministry’s proposal to sell its residual stake in HZL after deliberating at length on the possible legal implications of the sale.
The proposal for residual stake sale in Balco is expected to be taken up at the next meeting of the CCEA, said a person privy to the development.
It is learnt that Attorney General GE Vahanvati was invited to the CCEA meet to explain the legal issues in the aftermath of the stake sale. It was Vahanvati who had last week cleared the decks for enabling the government to sell its stake in HZL, notwithstanding a CBI inquiry into the earlier disinvestment process in the company.
Last month, a meeting chaired by the Prime Minister, also decided that the remaining stake would be sold through open auction rather than selling it to Vedanta Group. However, the meeting decided to solicit Vahanvati’s opinion through the mines ministry before taking a final decision.
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In the case of Balco, Vahanvati has backed the mines ministry’s note to sell it through the offer of sale route.
The HZL stake sale is expected to give a breather to the cash strapped government, which is struggling to contain its fiscal deficit at 4.8 per cent of the GDP. While tax collections have remained muted, the estimated Rs 40,000 crore from disinvestment proceeds has also not been met.
Against a budgeted Rs 54,000 crore from stake sale – Rs 40,000 crore in state-run companies and Rs 14,000 crore from residual stakes- the government has so far managed only about Rs 3,000 crore.
It had to settle for special dividends from cash-rich PSUs like Coal India and NMDC Limited owing to firm opposition from their employees and also partially due to sluggish market conditions.
The other disinvestment options are stake sale in Axis Bank and Rs 5,000 crore from acquisition of 10 per cent government stake in Indian Oil by ONGC and Oil India.