As a result, the pricing of the issue--which was expected to take place this week--has not materialised, forcing the company to defer its decision to hit the retail equity market before August 24. The nation will go to polls in the first week of September.

Industry sources in New Delhi said that the company cannot meet the August 24 deadline as the pricing has not been fixed. "The pricing had to be decided this week for the issue to adhere to the original deadline. Now, it is not possible as the matter was referred to the EC and it has reportedly objected to the timing of the issue and the Government's role in the pricing," sources said.

The Centre was slated to kick off its disinvestment programme through the VSNL issue. The Cabinethad on July 6 cleared the offloading of the 10 lakh shares through retail offering in the domestic market. Earlier, the Government had referred the decision to the EC for approval as it was playing an active role in the pricing of the issue.

Sources had maintained that because of the decision to divest the shares was taken before the announcement of the general elections the model code of conduct would not be applicable to this case. However, this has evidently not been the case, sources pointed out.

The company was likely to price its shares to the domestic retail investor at Rs 700-800. This effectively means that the Government will be offering the shares at a 35 per cent discount. The scrip is quoting at Rs 1,130 on the Bombay Stock Exchange (BSE). Although the prospectus has been filed with the Securities and Exchange Board of India, it was done so without a price band.

The VSNL issue will be followed by Mahanagar Telephone Nigam and Indian Oil Corporation.

INSIGHT

Nothing politicalabout it

The most plausible reason for stopping the VSNL divestment process is the fact that the there has been an inordinate delay in deciding the pricing aspect. The view taken by the EC pre-supposes that the entire pricing process of the PSU disinvestment is political. This should not be the case. The pricing process, that is discount to the market price, has to be based on market reality and not be seen as an attempt to benefit domestic investors.

-- Aaron Chaze