Commission chairman GV Ramakrishna on Tuesday wrote to members of the group of ministers warning them about the `dangerous consequences' of converting public sector enterprises into non-government companies and thus taking them out of the purview of statutory controls like the parliament, the central vigilance commissioner (CVC), the comptroller and auditor general (CAG) and the Central Bureau of Investigation (CBI).

"It is a case of 49 per cent shareholding and zero accountability," Ramakrishna told The Financial Express. With 49 per cent equity, the government as the single-largest shareholder will continue to effectively control the public sector enterprises but without any accountability whatsoever, he said.

Companies like IBP, HPCL, BPCL, MTNL, IPCL and IDBI, which have beenselected to kick start the privatisation process through the SPV route, places orders and conducts business worth over Rs 70,000 crore in a year. If these firms were taken out of the statutory controls, there will be no one to question such decisions. For all practical purposes, these companies will continue to be under the effective control of the respective ministries, Ramakrishna said.

The only difference in government holding 51 per cent equity is that the ministers and officials will be accountable to respective authorities for their acts of commission and omission.

The commission, pointing out various other flaws in the SPV scheme, said the whole scheme is not in tandem with the BJP government's policy of disinvestment as spelt out by finance minister Yashwant Sinha in his 1998 budget speech. Sinha had said, "Government has... decided that in generality of cases, the government shareholding in public sector enterprises will be brought down to 26 per cent." On the other hand SPV only talks aboutreducing the government stake to 49 per cent which will mean stopping a step before privatisation but throwing the yoke of statutory controls.

Ramakrishna said the concept was successfully tried in the case of Singapore Telecom, but that was an outright sale of the company amounting to $1 billion. The model cannot be applied with any success in domestic conditions with the aim of SPV being only to reduce government holding to 49 per cent.

The disinvestment commission chief further pointed out that the need of the hour was to sell sick public sector companies to entrepreneurs who might investment some funds and resuscitate them. "If the government hands over the blue chip companies to the private sector, it will be left only with limping ones," he stressed.

The commission is also sore over the fact that the government had not taken any worthwhile decision on its recommendations pertaining to 43 public sector companies spread in eight reports, and on the other hand came out with a fancy scheme withouteven consulting the body set up for the purpose.

Meanwhile, the official spokesman, has clarified that reports appearing in a section of the press that core group of secretaries on disinvestment has created a SPV for raising Rs 4,000 crore by divesting government's shares to 49 per cent in various blue chip public sector companies were incorrect.

However, he added, that the core group decided that the ministry of finance, which made the presentation at the meeting, will bring up the subject before the group of ministers after consulting various ministries and the disinvestement commission.