Volume 18 - Issue 08, Apr. 14 - 27, 2001India's National Magazine from the publishers of THE HINDU

CONTROVERSY

The Balco struggle

The Chattisgarh government and the striking workers of Balco have effectively stopped Sterlite from taking control of the company.

V. SRIDHAR

MORE than a month after the privatisation of Bharat Aluminium Company (Balco), Sterlite, its new owner, is still unable to establish control decisively over the affairs of the company. The Balco privatisation exercise, welcomed by votaries of disinvestment as the unrolling of the "privatisation juggernaut in India", has effectively been stopped dead on its track by the month-long peaceful struggle by Balco workers at Korba in Chattisgarh State.

The struggle over Balco is far from over. While protagonists of economic reform have called for the "game to proceed" after the sting operation by the Tehelka team, critics aver that l'affaire Balco and tehelka.com's revelations are similar happenings in the same permissive environment that the reforms have created in the last decade.

Although the Union government sold 51 per cent of its stake in Balco to Sterlite for Rs.551.50 crores on March 2, Chief Minister Ajit Jogi's firm support to the striking Balco workers has effectively prevented Sterlite from taking control of the company (Frontline, March 30, 2001). Meanwhile, the Balco sale, entangled in several vital legal issues raised by the Chattisgarh government, is before the Supreme Court. In a significant development on March 12, the State government told the Supreme Court that it was willing to purchase Sterlite's stake in Balco for Rs.552 crores; it followed this up by filing an affidavit in early April. Jogi's contention, both in the court and outside, is that the sale violates important safeguards accorded to tribal people. He has alleged that the sale is an affront to the self-respect of the predominantly tribal State.

On March 12, the Supreme Court vacated its March 7 interim order to the State government asking it to provide water, electricity and food to the employees and to ensure security at the Balco plant so that those who wished to attend work could do so without fear. The court vacated the order on the submission of Kapil Sibal, counsel for the State and Congress(I) Member of Parliament, that the interim order had damaged the new State's reputation. He argued that the order resulted from the Centre's "false averments", based on presumptuous reasoning and contrary to facts. Sibal drew attention to the peaceful situation prevailing in Balco Nagar and the sense of responsibility with which the workers had conducted the agitation. He particularly referred to the pains the workers took to engage in maintenance work, without accepting any wages, even as they continued with their agitation.

The State government alleged that the Disinvestment Ministry sent a fax message to the State's Chief Secretary on March 6, a holiday, at 9 p.m., seeking the government's cooperation in maintaining law and order at Korba.

Outside the court, Congress(I) spokesperson S. Jaipal Reddy alleged that although the Chief Secretary did send a response the following day, Disinvestment Minister Arun Shourie indulged in subterfuge so as to go to the Supreme Court with a grievance where none existed.

The apex court, however, declined to stay the notices dated March 2 and 3 issued by Emil Lakra, the Sub-Divisional Officer (Revenue), Korba, calling upon the Secretary, Department of Disinvestment, to show cause why the lease of the land on which the Korba plant was set up should not be cancelled. Similar notices were also issued to Anil Agarwal, Sterlite chairman, and S.C. Krishnan, Sterlite's managing director.

The notices mentioned that the land occupied by Balco was acquired from tribal people and Dalits in Rishda, Padimar and other villages against Balco's application of July 24, 1971, bearing the number Pers/Estate/ LA/71/c25. The notice pointed out that Balco's application mentioned that the land was required by the government for specific "public purposes". It drew attention to the fact that since the management of Sterlite comprised private and not tribal entities, the land held by the erstwhile public sector undertaking could not be transferred to the new management, in violation of the Madhya Pradesh Land Revenue Code, 1959.

ONE of the main grounds for Jogi's opposition to the Balco deal rests on the premise that the sale violates constitutional safeguards under Schedule V of the Constitution. The provisions prohibit the use of land acquired from tribal people for private gain. The government argues that since Balco's public character has changed with its sale to Sterlite, the acquisition violates multiple legal provisions that guarantee protection to tribal people.

Arun Shourie, in an interview to Businessline newspaper on March 13, claimed that Balco enjoyed immunity from these provisions because the State government had not notified these areas as tribal land. However, a senior government official in Raipur told Frontline that the relevant area, the Kotgara tehsil, had been notified under Schedule V in 1950. He said that Shourie was "blissfully unaware of reality". Sources in Delhi and Raipur said that both the Union Ministry of Mines and Minerals as well as Jardine Fleming, the global adviser to the government on the Balco disinvestment, had in the run-up to the privatisation exercise cautioned the Ministry about the "legal problems" that were likely to arise as a result of the move.

Informed legal sources said that a "secret memo" was in circulation in government circles to amend the Constitution in order to remove the provisions that offer protection to tribal people. Rajeev Dhavan, who is representing the Balco workers in the Supreme Court, told Frontline that Schedule V was governed by a regime of prohibition and permission. He said that in the Balco case, at the time of acquisition of land more than 25 years ago, "no permission was sought or granted to Balco to conduct its activity in land which belonged to the local tribal people." Dhavan said that the government was unwilling to state openly that it was working against the

interests of the tribal people. He said that although technically these constitutional safeguards could be removed through amendments, "the government does not have the courage to do so in an open manner".

The reaction of Arun Shourie to Ajit Jogi's offer to buy Sterlite's stake was dismissive. "There is no question of going back on a settled commercial transaction," he said.

Law Minister Arun Jaitley joined in, claiming that the Balco disinvestment had been "most transparent" and that "the government does not react to what is said in frivolity". Jaitley also said that the Centre did not wish to overturn a "settled commercial decision". He alleged that Jogi's actions had harmed the interests of Chattisgarh, particularly the investment climate in the State.

However, the Chief Minister claimed that investor confidence in the State had not been affected, pointing to expressions of interest shown by several Indian and foreign industrial houses, including the Jindals, Daewoo and some Japanese companies. "Everybody knows we are not against private investment, we are only against the shady deal which has put us in a vulnerable position," he said.

The Sterlite management, which tried to maintain a conciliatory posture with respect to the Chattisgarh government, reacted strongly to the State government's offer, describing it as "wild", and rejected any review of its deal.

As the Centre's actions came under media scrutiny following the disclosures, Shourie adopted a more defensive posture. He took pains to point to the technical details in the shareholder agreement with Sterlite under which the company was committed to a three-year lock-in period. Shourie pointed to the "tag-along right clause" in the shareholder agreement, which stipulated that Sterlite would have to sell the shares at a discount of 25 per cent to the government if it wanted to exit within the three-year lock-in period. The Minister also claimed that another "protective clause" stipulated that if the strategic partner wished to exit within the lock-in period, the new purchasing entity would be obliged to buy the remaining 49 per cent held by the Centre. Shourie's comments, effectively aimed at upping the ante, implied that Chattisgarh may have to incur an expense in excess of Rs.1,000 crores, in one bullet payment, if it wanted to take over the company. He quoted the Rs.664 crores fiscal deficit of the State to argue that it did not have the resources to make an investment in Balco.

On March 12, Central Vigilance Commissioner (CVC) N. Vittal added another dimension to the Balco affair when he wrote to Ajit Jogi and the Central Bureau of Investigation (CBI) regarding the allegations of kickbacks in the deal. He based his action on "a complaint that money had been paid to officials in the Disinvestment Ministry". He wrote to Ajit Jogi and CBI Director R.K. Raghavan for their comments. Jogi has alleged a Rs.100-crore payoff, a charge denied by Arun Shourie. Jogi has said that since the CVC's jurisdiction would cover only government servants, and since the alleged payoffs were made to extra-constitutional authorities, a veiled reference to the Prime Minister's Office, no worthwhile gain would be served by a CVC probe.

The Sterlite management suffered a setback on March 26 when the Labour Court at Bilaspur refused to pass any order on its petition seeking to declare the workers' strike illegal. First-class magistrate A.K. Sanothia observed that he would give a ruling on the petition only if the Supreme Court ordered the Labour Court to proceed on the matter. The employees union had argued that since the Supreme Court had ruled that all cases pertaining to the Balco affair in the Chattisgarh and Delhi High Courts be kept pending till the matter was heard in the apex court, the petition in the Labour Court should be treated similarly.

The seven trade unions in Balco remain united in their struggle. Although the Sangh Parivar-related trade union, the Bharatiya Mazdoor Sangh (BMS) has broken ranks with other unions at national level on joint protests against the proposed changes in labour legislation, it does not wish to incur the wrath of the workers at Balco Nagar.

On March 26, the Korba district administration refused permission to Balco to move stocks out of the plant. District Collector K.D.P. Rao prohibited the company from removing Rs.75 crores worth of stocks out. The Jogi administration's move to increase the entry tax on bauxite from 10 per cent of the landed cost to 50 per cent is also likely to impact on Balco's bottomline. (The Sterlite management entered into an agreement with the Orissa government to source bauxite from mines in Orissa on the day the Centre transferred its stake in Balco.) Jogi says that the move to increase the entry tax is aimed to ensure that industries source bauxite from within the State.

V.C. Shukla, former Union Minister and the prime Congress dissident in Chattisgarh, told Frontline that the entry tax should be hiked to 100 per cent. He also said that the government should direct the State Electricity Board to rescind the permission to Balco to generate power from its 270 megawatt captive power plant.

A SENIOR officer in Balco said that the stalemate continued because "Jogi is with the workers and the management is maintaining a low profile". Krishnan has been away in Delhi. The workers are not ready for talks with the new management. According to Brahma Singh, general secretary of the Balco Employees' Union, the workers are determined to participate only in tripartite talks involving both the Union and State governments.

The strike has been remarkably peaceful so far. Despite the month-long strike and the loss of income, the workers have managed to sustain their enthusiasm. Food is served twice a day at the langar near the main plant at Balco Nagar. The Nijikaran Virodhi Samyukt Samiti, a broader anti-privatisation platform in Korba, has managed to collect donations to sustain the workers, particularly the 1,000-odd contract workers. All the Ministers in the State Cabinet have contributed a month's salary.

The Balco workers have the support of coal mines in Korba. The miners of South Eastern Collieries Ltd. have decided to donate a day's wages amounting to Rs.28 lakhs to the striking Balco workers. Similar offers of support have also come from the workers of the National Mineral Development Corporation (NMDC). Workers in the Bhilai Steel Plant, the National

Thermal Power Corporation and the Chattisgarh State Electricity Board have all offered financial assistance. On March 23, a seminar on privatisation was held at Balco Nagar. Among others, senior Communist Party of India leader Gurudas Dasgupta participated.

B.L. Netam, an activist of the Centre of Indian Trade Unions (CITU), said: "We are ready for the long haul. This is no longer just a workers' agitation; the people have become involved in it and they are ready to make sacrifices." The workers burnt effigies of the Union government and Anil Agarwal in Balco Nagar on April 1.

Brahma Singh said that only 23 workers are working in the plant, mainly to carry out maintenance work. He said that the unions had ignored advertisements issued by Sterlite seeking their cooperation to arrive at a settlement. "Although the management sent their agents to us to negotiate, we have steadfastly refused to deal with Sterlite...We are confident of success," he said.

A Chattisgarh Mahabandh on March 16, called initially by the trade unions but later backed by Ajit Jogi, was a success. Jogi paid a visit to Balco Nagar to boost the morale of the striking workers. The success of the bandh, despite Jogi's absence (he was away in Bangalore to attend the AICC meet), indicated that the anti-disinvestment agitation had acquired a significant momentum.

The Balco issue has acquired new overtones since the Tehelka expose, particularly in the context of Jogi's allegation that the Balco sale involved corruption in high places. However, the protagonists of economic reform, including leading industrial organisations such as the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Confederation of Indian Industry (CII), have said that the attention on political corruption should not hinder the unrolling of reforms, a notable feature of which is the hastened privatisation of profitable PSUs. However, critics argue that the shadow of corruption is an inevitable part of the very concept of privatisation of public assets.

http://www.frontline.in/static/html/fl1808/18080990.htm

Business Today

DISINVESTMENTA Suitable Match

Controversies over valuation apart, Sterlite's acquisition of Balco has few downsides to it.

By Roshni Jayakar

A controversy is great for a magazine strapped for space. This report on the Balco sell-off, for instance, can start virtually mid-way, assuming that readers know all about Sterlite winning the bid, the ensuing brouhaha, and its

eventual triumph in the Parliament a day after the budget. The popular press has covered the event in such detail that everyone is aware that Sterlite bid almost twice as much as the Aditya Birla Group's Hindalco. Why, even the most passive among readers must have been impressed at the knowledge of the science of valuation our politicos suddenly acquired.

Amidst all the heat the deal was generating, Sterlite's Chairman & Managing Director, Anil Agarwal, speaking to this correspondent from his Berkley Square office in London-he flew down to India a day after the deal was announced, and back a day later-sounded unruffled: ''I am not uncomfortable... everything is there in black and white.'' When pressed to comment on Chattisgarh cm Ajit Jogi's threat to cancel Balco's mining lease, Agarwal suggests the just-born state should be happy to welcome investors, not turn them away.

Balco's Assets

Korba Plant (chattisgarh)� Smelting: 100,000 tpa� Alumina: 200,000 tpa� 3 wire rod rolling mills� 3 extrusion presses� New cold rolling mills� 274 MW power plant

Bidhanbaug plant (West Bengal) � Hot and cold-rolling mills� Extrusion press� 600-tpa foil plant� Conductor plant

The Valuation Equation

For those who missed out on the numbers, courtesy all that noise, Sterlite will acquire 11.2 crore shares (face value: Rs 10) of Balco for Rs 551 crore. That amounts to Rs 49 a share. Agarwal won't have a problem finding the money to consummate the deal. Sterlite's debt-equity ratio is a healthy 0.6, and it generated cash profits of Rs 123 crore in the first half of 2000-01 (year-end estimates: Rs 275 crore). Avers Jigar Shah, an analyst at the Mumbai-based KRC Securities: ''For Sterlite, the Balco acquisition could just be a two-year cash-flow in terms of financing.''

That number, Rs 551 crore, could be too low as some politicos wish us to believe, or it could be too high, as some defenders of Agarwal claim. But beyond the numbers, Balco makes a great acquisition for Sterlite. It allows Agarwal to buy into one of the country's largest aluminium makers (See Balco's Assets). In one stroke, Sterlite will end up with an integrated presence in aluminium: from bauxite that costs Rs 300 a tonne to foils that cost Rs 150,000. Analysts point

out that with the quantum of aluminium produced in the US declining, and global demand for the metal rising, integrated producers in India could look beyond national boundaries.

There is also the issue of size. The deal will turn Sterlite, which acquired an ailing Malco from the Board for Industrial & Financial Reconstruction (BIFR) in 1995, into a major player in aluminium. Agrees Monika Agarwal, an analyst with First Global: ''With Balco, Sterlite can reinforce its foothold in aluminium.'' The former, after all, is the third-largest aluminium company after Hindalco and Nalco.

Shortchanged?

How much is Balco really worth? According to critics, it is as high as Rs 5,500 crore. But that number is more a factor of political equations than commercial reality, because the market price of Balco-it has Rs 1,072 crore in assets-is closer to what Sterlite has offered for a 51 per cent stake. For one, valuations in an acquisition are done more on the basis of discounted cash flow, which projects future cash flow and discounts the figure with the weighted average cost of capital. As per this calculation, Balco's value ranges from Rs 651 crore to Rs 994 crore, making Sterlite's offer of Rs 551 crore seem appropriate. Stockmarkets themselves are unwilling to give high P/E multiples to the aluminium industry. Hindalco gets a P/E of 9.5 and Nalco 7.7; in contrast, Sterlite is valuing Balco at 18.8 times its earnings per share.

The Challenge At Balco

With the deal sealed-on March 1, the Lok Sabha overwhelmingly voted in favour of Balco divestment-Agarwal must now manage a company that is among the most expensive producers of aluminium in the world. Every tonne of aluminium produced by Balco costs Rs 75,000; in contrast, it costs Hindalco just Rs 46,000 per tonne. The company is profitable (Rs 56 crore in 1999-2000, expected to dip to Rs 25 crore in 2000-01), but its plant is outdated (set up in 1965) and it boasts a workforce of 7,000. Agarwal, who thinks India is the best place to produce aluminium for global markets, hopes to make a beginning by slashing Balco's production costs.

''We faced something similar when we took over Malco,'' says Agarwal, ''but we managed to up productivity and profits without retrenching anyone.'' For the record, Malco is upping capacity to 49,000 tpa from 33,000 tpa. But having swung the deal against all odds, Agarwal must now grapple with the equally daunting management challenges that await him at Balco.

Ajit Jogi, Chief Minister, Chattisgarh, on Balco:

Q. What are your objections to the Balco disinvestment?A. Something that was worth Rs 5,500 crore has been sold for Rs 550 crore.

Nobody was told about this sale; even I as the Chief Minister of the state where the mines are located was not consulted. This entire deal was done surreptitiously.

How did you get that sort of valuation? I am going by what the three Balco unions and my administration, as in the district collectors, have told me. There is a power plant, which is worth Rs 1,500 crore, there is land and the plant itself was set up 30 years ago. If you were to set up the same plant today, it would cost so much more.

But the land will remain with Balco and the government retains a large holding, so the dividend will keep flowing? Sterlite is buying the land, it can do what it wants with it. And how much dividend will the government get?

But the second bidder, Hindalco offered only Rs 275 crore? Obviously, those who are not interested in buying, won't make a serious bid.

So, what now? The government should cancel the deal. I have spoken to people and I can guarantee a higher bid.

What about the mining lease? Once Balco ceases to be a public sector company, the mining and land lease automatically get cancelled. That's because according to Schedule 5 of the Constitution, you cannot give tribal land to a private company.

http://archives.digitaltoday.in/businesstoday/20010321/cf6.html

People's Democracy (Weekly Organ of the Communist Party of India (Marxist)Vol. XXVII

No. 50

December 14, 2003

STERLITE’S MALPRACTICES:

Violating Share Purchase Agreement With Impunity

THE Sterlite Industries has sold its 55 per cent equity to Twinstar Holdings, Mauritius without permission from the government of India. (The Telegraph, New Delhi, October 28, 2003). The implication of this deal is that BALCO and Hindustan Zinc are being deceptively sold to a third party which may ultimately be handed over to the Volcan Investment Ltd. UK. Twinstar Holdings now having 55 per cent stake in Sterlite industries wants to raise this to 75 per cent.

At the time of disinvestment in BALCO on March 2, 2003, the Sterlite Industries acquired 51 per cent stake in BALCO by paying Rs 551.5 crore for assets worth Rs 3,500 crore. BALCO had been a cash-rich public sector company with reserves and surplus alone worth Rs 460 crore. It Korba power plant was worth more than Rs 1100 crore. BALCO had been a profit-generating, dividend paying company contributing around Rs 300 crore annually to the government by way of taxes.

The government of India had made its Share Purchase Agreement (SPA) with Sterlite Industries which imposed various restrictions on the latter for a minimum period of three years. As per SPA schedule 7.4, the following is binding on Sterlite Industries:

Minimum period of agreement is for 3 years (renewable). During 3 years Sterlite cannot sell/re-sell/ or mortgage BALCO’s fixed and movable assets to another company. Sterlite cannot close down the plant or its units. The name and title and business of the company cannot be changed. Sterlite cannot enter into business partnership with any other company. All service rules and conditions as applicable in government period would continue and no retrenchment of employees can take place except through VRS which shall not be less attractive than the government VRS.

All these conditions were brought before the Supreme Court and both the government and Sterlite submitted in their affidavits filed before the Supreme Court not to violate the Share Purchase Agreement (SPA). However, Sterlite has been violating SPA with impunity. By way of example we may mention the following:

Just after acquisition of BALCO, Sterlite started selling 6000 MT stock of finished aluminium and receiving the money directly in Sterlite Accounts. This stock was accumulated prior to transfer of BALCO to Sterlite and its hasty sale has caused a loss of about Rs 50 crore. Sterlite also began selling machinery, equipment and other movable assets of Bidhan Bag Unit (West Bengal), Amarkantak (MP) and Gandhamardan (Orissa) mines of BALCO and diverted all the money received to Sterlite Account. Sterlite management replaced experienced BALCO engineers by inefficient and incompetent engineers. As a result prestigious smelter plant of 100,000 MTY was damaged. Many of BALCO officers were removed within few weeks from key posts to keep entire

fraudulent management strictly confidential. Under duress many officers of BALCO are being transferred to non-BALCO units viz, MALCO, India Foils, OFC, Ukraine etc. In respect of deciding service conditions, particularly retirement age of the officers, Sterlite management has been functioning arbitrarily. As per SPA, retrenchment of employees is not allowed. However, retirement through VRS is possible. The benefits under VRS are to be as attractive as under government VRS. Under this provision Sterlite management invited applications from BALCO officers for opting retirement under VRS in July 2001, but no decision was taken for about 10 months. On March 26, 2003, vide letter No. Kb-Pers Estt (MPP) B-2070/2002, the management communicated to VRS applicants that their applications for retirement under VRS could not the considered because BALCO had expansion plans for the future. But contrary to this, the Sterlite management arbitrarily lowered the retirement age of the officers from 60 to 58 years vide letter No. Kb–VP (HR)/J Employee dated April 15, 2002. This is gross violation of the SPA. The officers in BALCO brought it to the notice of the government of India and made an appeal for its intervention. The government nonetheless remained indifferent to the whole matter and no intervention came from its side for a long time. In February 2003 a high power team headed by Hashu Bhai Dave, president, All India Trade Council was appointed by the prime minister to look into the injustices being done to employees of disinvested PSUs – BALCO and Modern Foods. The committee submitted its report to the prime minister in June 2003 but no action has been taken against the erring management of Sterlite. Emboldened by the indifferent attitude of the government, Sterlite management is illegally selling 75 per cent of its stake in BALCO to Twinstar Holdings/Volcan Investment, UK. The deal is in contravention of the SPA between Sterlite and the government. As a result of this transfer of stake by Sterlite to Twinstar Holdings/ Volcan, its share in BALCO will decline to only 12.75 per cent as against stake of the government of India at 49 per cent. Strangely despite sharp reduction in the stake of Sterlite in BALCO, it still retains management in its hands.

Resale of BALCO by Sterlite to Twinstar Holding without permission from the government of India has been done illegally. Apart from this Sterlite has been found involved in serious malpractices such as evasion of excise duties, and manipulation of BALCO’s balance sheet and other accounts. The working of Sterlite ever since it acquired control over BALCO clearly shows that disinvestment in PSUs has created conditions whereby corruption and frauds in private companies buying PSUs has increased.

(This write up is based on the representation made by BALCO Officers Association to the prime minister of India recently.)

http://archives.peoplesdemocracy.in/2003/1214/12142003_balco.htm

The BALCO SelloutOften the best laid plans of men and mice go awry. On February 21, days before the general budget, the Minister for Disinvestment, Arun Shourie, announced in a press conference that the controlling stake in BALCO (Bharat Aluminium Company Limited) was being offloaded to the Sterlite Industries Ltd. Sterlite had offered Rs. 550 crores for the controlling stake in BALCO. Predictably, there was furore all over.

BALCO is the 3rd largest producer of Aluminium in the country. It has a turnover exceeding Rs. 900 crores and has huge real estate, including the BALCO township. The replacement cost of its 270 MW power plant itself is more than Rs. 1,500 crore. And the replacement cost of its Fixed Assets is valued at over Rs. 5000 crore. Whereas Sterlite Industry was handed over the company’s control for Rs. 552 crore for a 51% stake in BALCO.

In handing over BALCO to Sterlite group, the Central Government showed undue haste. It ignored the Supreme Court order prohibiting the transfer of tribal lands to non-tribals. Land for BALCO was acquired for public purpose and cannot be transferred to private hands as per the section 44(A) of the Land Acquisition Act. It has claimed that the valuation of BALCO is just and fair, it was done by experts and it could not be challenged in the court. However, these experts took only 11 days to complete the valuation. Replacement cost of entire BALCO ( both units, power plant, township) was calculated in 3 days flat, which included travel time

Privatisation by stealth

Issues of fair valuations and transparency apart, the BALCO deal raises important questions about the way the privatization is being carried out.

1. Privatization is being carried out by stealth. The Parliament is not taken into confidence. (In the present case there was voting in Parliament on the issue but it was after the deal had been struck). Though technically it can be argued that the concerned ministry is competent to take decision regarding sell-off, it has to be understood that these are not isolated one-time deals. These are part of a policy package which runs counter to some of the provisions of the Constitution, and the legality of the same should be questioned.

2. There is marked lack of eagerness on the part of the Government to involve general public in the disinvestment process. There is a tendency to cater to the individual corporate interests only. And shares of the enterprises are put on block sale and not offered to the public at all. Quite expectedly, a reluctant owner desiring to sell for other than commercial reasons will not inspire high prices.

3. Stakeholders in the enterprises, the employees and their unions, were not taken into confidence.

All allegations of money changing hands were brushed aside. According to the minister, the tendering was fair and transparent. It was another matter that the only other bidder,

HINDALCO, had quoted Rs. 250 crore, and was clearly a non-serious bidder. In fact, connections of a minister’s son-in-law with Sterlite group had also been brushed aside.

It was left to the workers at the plant to fight it out. And despite predictions in the press about their giving in meekly, they have held out. In the meantime, the past seems to be catching up with Mr. Shourie's paragon of virtue, Sterlite Industries. The Sterlite group, which was black listed one time by the Ministry of Telecommunications for supplying substandard optic fibre, fined Rs. 28 crore, has been banned by SEBI for entering the market for 3 years. The orders came in a case of rigging of its own share prices in 1998. The Sterlite Group cannot now raise the resources (Rs. 3,000 crore) to finance expansion and modernisation of BALCO.

Come to think of it, the Central Government’s, “inability to finance such modernisation” was the reason to disinvest, read dump, BALCO in the first place. The trade unions have opposed the deal tooth and nail. The workers have resolved to fight BALCO privatisation, come what may. The 8 central trade unions, including the AICCTU, have pledged their all out support. They know that the BALCO struggle is a test case. If they can block BALCO privatisation the greater disinvestment designs of the government will be put on hold. A countrywide solidarity movement among workers and general public is on. In a convention in Delhi held earlier in April, a Citizens’ Committee has been formed to mobilise solidarity for the BALCO workers. For its own populistic compulsions, the Ajit Jogi govt. too has taken an initial stand against the BALCO deal. The struggle is on. Menwhile, the SEBI intervention has come. Best laid plans of the government and the Sterlite group have come unstuck.

Aluminium Sector Prospects

In the long term, the outlook regarding the white metal in India is optimistic. An increase in the number of potential applications for which aluminum could be used is expected to spur demand for this metal in the future. The electrical sector, using it in the form of wire rods for transmission of electricity, is the biggest user. However, with the increasing use of aluminum in the automobile, packaging, consumer durables and construction sectors, demand for aluminum is bound to increase. This, coupled with the fact that India is amongst the low cost producers of the metal in the world, implies that long term prospects for the sector is very encouraging. Source : Indiainfoline.co

Sold for a song

BALCO was established in 1965 as the primary aluminium industry in India. Bharat Aluminium Company Limited (BALCO) was a dividend paying, profit-making company in the aluminium sector. BALCO has two working units -- an integrated aluminium complex situated at Korba in Chhattisgarh and the other in West Bengal at Bidhanbag, equipped to produce downstream facilities. Balco is vertically integrated from sourcing of bauxite from its captive mines, refining and smelting to produce aluminium and a variety of semi finished productsFinancial Highlights

1991-92 1999-2000

(Rs. crore) (Rs. crore)

A. Free Reserves & Surplus 2.2 450.22

B. Capital Reserves 9.68 9.51

C. Fixed Assets

e) Gross Block 781.76 932.04

f) Less : Cum. Dep. 288.08 638.33

g) Net Block 493.68 293.71

D Sales 518.60 898.18

E Net Sales 27.03 773.70

F Profit/(Loss) before tax 1.38 116.19

G. Ratio of Profit before tax to

i) Capital employed 0.29 15.04

ii) Net Worth 0.38 17.28

iii) Sales 0.36 12.94

b) Profit after tax to Equity 0.38 22.87

c) Earning per share (in rupees) 0.31 2.29

http://www.cpiml.org/liberation/year_2001/april/balco.htm

BUSINESS » COMPANIES

NEW DELHI, March 1, 2012

Updated: March 1, 2012 19:01 IST

Sterlite offers Rs 16,000-cr to buy Govt’s stake in HZL, Balco

Sterlite Industries has offered Rs 16,000 crore to buy out government’s stake in Hindustan Zinc and Balco, almost a decade after Anil Agarwal-led firm acquired majority holding in zinc and aluminium producers.

The offer was made in January but Vedanta Resources, the parent company of Sterlite, is yet to hear from the government, group Chairman Anil Agarwal told PTI.

“Government had asked us, if we will be interested to take its stakes in HZL and Balco. We answered in the affirmative. As per the prevailing market price in January, we have offered Rs 16,000 crore for buying stakes,” he said.

When asked for a projected time-line for completion of the deals, Chairman of the USD 70 billion metals and mining major said, “This is not in my hand. It is up to the government.”

Vedanta’s offer has been made at a time when the government is looking at various sources of increased revenue generation, including divesting its stake in the public sector units (PSUs).

Government still holds 49 per cent stake in Balco and 29.54 per cent in Hindustan Zinc. Majority holdings in these two firms were sold to Sterlite in 2001 and 2003 respectively.

However, the government does not seem to be satisfied with the offer, particularly for Balco. The empowered group of ministers had favoured a status quo.

Vedanta group company Sterlite Industries, through Sterlite Opportunities and Ventures (SOVL) holds 64 per cent stake in HZL. SOVL had initially acquired 26 per cent stake in HZL in 2002.

The Vedanta is revamping its corporate structure by merging Sterlite Industries into another group firm Sesa Goa.

Agarwal said the Vedanta Group firms would be able to generate USD 7-8 billion profits per annum and the surplus, thus generated, could be used for expansion plans.

http://www.thehindu.com/business/companies/sterlite-offers-rs-16000cr-to-buy-govts-stake-in-hzl-balco/article2950345.ece