The sale of the government’s residual share in Hindustan Zinc Limited (HZL) has run into a hurdle with the Supreme Court (SC) taking up for hearing a petition challenging the divestment to London-based Anil Agarwal-managed Vedanta Resources.
The petition, filed by the National Confederation of Officers Associations of Central Public Sector Undertakings, has challenged the disinvestment on the ground that it was illegal and alleges that the company was grossly undervalued when it was initially disinvested in 2002 during the then-National Democratic Alliance regime.
SC has asked the government to furnish more information on the issue on Tuesday also asked the Central Bureau of Investigation (CBI) to submit details of the preliminary enquiry that it has carried out into the ‘undervaluation’ of HZL.
According to sources, a letter sent to the Prime Minister(PM) on the alleged undervaluation of the company and the illegal nature of the disinvestment has also queered the pitch.
Sources disclosed that the Prime Minister’s Office has sought information from the ministry of mines and the finance ministry’s Department of Disinvestment on the issue.
The erstwhile United Progressive Alliance (UPA) government in January approved the sale of the government’s remaining 29.54 per-cent stake in HZL, but there were serious differences between the ministry of mines and the finance ministry, which was then headed by P. Chidambaram, on the issue.
The ministry of mines had held the view that the stake sale cannot not take place without Parliament’s approval. This view was based on the SC judgment in the Bharat Petroleum and Hindustan Petroleum case in September 2003, which stated that public sector companies were created by an Act of Parliament and cannot be privatised without an Act of the House.
According to sources, the CBI enquiry has highlighted that three proven mines which were close to the production stage and mentioned in the annual report of the public sector company in 2000-01 were not included in the valuation when HZL stake was offered for sale in 2002.
The total loss due to undervaluation is reported to be in the region of Rs 75,000 crore.
The letter, sent to the PM by C.P. Bhagel on behalf of the erstwhile employees of HZL, also alleges that the Sindesarkhurd Mining Development Project, which was at an advanced stage of planning for production with a whopping 81 million tonnes of geologically proven ore reserves of zinc, lead and silver clearly indicated in the previous balance sheets of the company, was not considered in the valuation of HZL during the initial stake sale.
The value of the reserves of the Sindesarkhurd mines would have worked out to roughly Rs 40,000 crore. Besides, scrap worth Rs 700 crore which was eventually sold after the takeover was not included in the valuation.
The Comptroller and Auditor General of India’s audit report after the stake sale had also pointed out that as the global adviser had assumed only three mines as non-core, the asset value should have valued not one but three mines on the basis of market value. These mines included Zawar mines, Rajpura Dariba and Rajpura Garucha mines of HZL.