Incidentally, the same government decided to postpone MTNL's issue due to bad market conditions but decided to sell GAIL shares at a massive discount. Secretary of the AICC's Economic Affairs Department Jairam Ramesh said the government's action was tantamount to "backdoor entry" of multinationals such as Enron and British Gas in a vital public sector undertaking like GAIL. Enron and British Gas have picked up 6 per cent stake in gAIL's total equity capital.

The government also deviated from its past policy of not allowing foreign competitors to acquire a stake in PSUs through the disinvestment process, he said. Enron officials say they invested in GAIL because the Indian government invited them to invest in GAIL. Enron has identified gas pipelines as its focus areas in India and at present is setting up a 300 km LNG gas pipeline from Dabhol to Talasari in Thane district. Alleging that there was no transparency in the deal, Ramesh recalled that the United Front government two years back had refused a price of around Rs 120 per share of GAIL while the Vajpayee government had allowed the disinvestment at a meagre Rs 70 per share.

Asked whether the party felt that the "distress sale" amounted to a scam, he said what has happened was "shocking" as the merchant bankers had suggested that the share of the blue chip navratna company could be sold in the range of Rs 300 to Rs 350.

Despite the deviation in the case of the GAIL issue, the government failed to capitalise to extract a higher price from either Enron or British Gas, say analysts. This error was especially glaring considering that the multinationals have strategic interest in GAIL's different projects which would be enhanced through an equity link. Replying to a query, Ramesh said that government might have gone in for the sale as an "easy way" to raise money to reduce the deficit. Besides, he said that the government wanted to achieve something in its "first hundred days".

He wanted the government to desist from tinkering with public sector and follow a long term policy of disinvestment. Analysts said the government's poor track record in managing its disinvestment continued with the GAIL GDR issue. Given the poor sentiment in the domestic stock market in general and the expectations of a higher price in the GDR market it is surprising that the government decided to go ahead with the disinvestment at such a ridiculously low price and unrealistic valuations. Effectively, a PSU with a present monopoly over domestic gas distribution and a recent entry into downstream products was sold at just five times historic earnings.

Ramesh deplored the "irresponsible attitude and cavalier approach" of the government to the public sector and said that "national interest, not narrow corporate interests, should drive the disinvestment process in the oil industry". There is a complete confusion on how disinvestment in the oil company will take place, he said and questioned the rationale behind government's decision to set up yet another hydrocarbons vision group when the disinvestment commission has already given its recommendations. He said the commission's initial three-year term ended in August 1999, and it has been in a state of limbo.

INSIGHT:

MTNL postpones GDR issue
NEW DELHI: Even as the government sold GAIL's share at a 11 per cent discount to domestic price, the MTNL said its 19 million global depository receipt issue to divest about 3 per cent government equity was deferred "indefinitely" due to ``adverse market conditions.'' "The government has deferred the issue indefinitely," MTNL chairman S Rajagopalan said but added that government might review the situation in January. Analysts said if a postponement could be considered for MTNL, then why could it not be done for GAIL. Based on feedback from global investors, the bankers Goldman Sachs, HSBC and Merrill Lynch asked the government to defer the issue, Rajagopalan said.