Cheque mate

There8217;s another mess in disinvestment. And it could be the biggest yet. The UPA8217;s decision to revalue Balco8217;s 49 per cent equity that Sterlite bought in 2004 8212; the first, controlling stake of 51 per cent was bought in 2001 8212; can be endlessly debated by poring over the original agreement and CAG8217;s assessment of it. But just as in the case of the nuclear deal, where BJP strategists had based their argument on super-exhaustive textual analysis while deliberately missing the big picture; on Balco, Congress ministers are taking great delight in accounting arcana while evading the big question: What is the effect on government8217;s commercial credibility if contracts change with political regime changes? This question can8217;t be left to accountants.

As India reforms, government-private sector contracts will increase in number and become more complex. Most contracts will be for projects that will last beyond the term of one government. If business doesn8217;t have the assurance that contracts will be election-neutral, finding entrepreneur-partners will become difficult, especially in the case of foreign investors. One can argue that Balco was sold for a song and still be sensitive to this concern while considering corrective action. There seems to be little evidence so far from UPA ministers8217; statements that this is appreciated. The chance to show up the NDA as cronies of capitalists seems to be the driving force, just as the NDA tried to paint the UPA as an American appendage vis-a-vis the nuclear deal.

If the Congress took the broader view of the Balco issue, it would have probably argued that CAG8217;s assessment 8220;vindicates8221; what it had said about strategic sales when in the Opposition but that since Balco is now sold, revisiting valuation would make little sense unless a mountainous scam was involved. Sending the cheque back to Sterlite makes for good political point scoring but it probably presages litigation and worse. The committee of secretaries charged with revaluation will take its time and its decision is unlikely to remain uncontested. Also, there8217;s the question that if professional deal managers bungled, as CAG has said, during the sale of Balco what is the guarantee that a group of bureaucrats can deliver a better commercial judgment? Perhaps, the UPA simply doesn8217;t want disinvestment. In that case, it should simply say so.