Govt evaluating 'sticky issues' for VSNL, Maruti sell-off

The government is sorting out the 'sticky issues' for the strategic sale of state-owned companies like Videsh Sanchar Nigam Limited and Maruti Udyog Limited, Secretary, Department of Divestment, Pradeep Baijal, said.

"Since the divestment would be through strategic sale, there are concerns from the administrative ministries, stake-holders and the workers which need to be looked into,'' Baijal said.

While the government has equal shareholding with Suzuki Motors in Maruti Udyog Limited, it has a majority stake in VSNL. Before DoD was created, the divestment programme largely meant the sale of the minority stake of the government in the market. However, the policy direction has since changed towards strategic sale of the government-owned companies to private sector enterprises.

"This is why many of the sticky issues need to be sorted out," Baijal said.

The whole process of sale through the strategic route will take about a year or so and the state companies that have so far flourished on monopoly situation could fast lose the competitive advantage reflecting in their valuations. For instance, Maruti which used to command over 80 per cent of the passenger car market in the country, recently saw its market share plunge to below 50 per cent.

"This question of valuation is being debated by us," Baijal said.

While the government would largely be following the recommendations of the Rangarajan Committee and the Divestment Commission headed by G V Ramakrishna and go in for the strategic sale, the stock market is not in favourable conditions for the direct sale. "The market is in a terrible state," Baijal said.

But will the valuations not be affected even through the strategic sale of companies like VSNL if the market conditions worsen in the next few months? "No, in strategic sales there are other methods of valuation and the market conditions would not affect the process," he said.

On the question whether there is any target for divestment in the current financial year, the DoD secretary said, "While in the budget the Rs 100-billion figure was mentioned, we are not following any target. The Rs 100-billion figure was mentioned since the budget cannot give anything abstract,'' he said.

The government policy clearly spells out that arms and ammunition, railways and atomic energy are in the strategic sectors. "But there are other issues like private monopoly. There is a feeling among the state oil companies that too much has already been opened up for the private sector. Intense debate is going on about these issues in the government," Baijal said.

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