GAs for PSU sell-off to be appointed today

GAs for PSU sell-off to be appointed today
ENS Economic Bureau

NEW DELHI, JULY 4: The government is likely to appoint at least 3 merchant bankers as global advisors for selling off of various public sector units within the next two days. These appointments are slated for discussion in a meeting of the Committee of Secretaries (CoS) today. Several other smaller PSUs are also ready to be put on the block and in all global advisors for at least 9 PSUs is set to be finalised in a week's time.

The 3 PSUs for which global advisors will be appointed soon are ITDC, Indian Airlines and Air India.

While officials are tightlipped about global advisors shortlisted, several merchant bankers like Merrill Lynch, Morgan Stanley, Lazard Capital are said to be in the race for bagging the mandate.

Among the three short-listed global advisors for the ITDC mandate are Lazard CreditCapital, Jones Lasalle, and HSBC-HVS-SBICaps. Sources say that Lazard is the lowest bidder and their bid is 0.4 per cent of the total sales proceeds from the ITDC sale. Lazard will bear all legal and out-of-pocket expenses arising from the sale as well. HSBC-HVS, who had won the mandate the last time around in September 1998 after 18 people had bid, are the next-lowest bidders and have bid around 0.5 per cent. (Though the global advisors were first appointed in 1998, a formal letter was never issued because the government developed cold feet, and the job was once again advertised in December last year.)

The global advisors for all the PSUs will suggest the best possible strategy for the sell off. This will then be debated in the Inter-Ministerial-Group (IMG), before a final nod is given. In case the issue cannot be resolved at the IMG, it will be placed before the Cabinet Committee on Disinvestment, or maybe even the full Cabinet itself.

This has been done to take care of the fear of various cabinet ministers, who feel that all powers have been taken out of their hands and have been given to the Department of Disinvestment (DoD) a few days ago, Aviation Minister Sharad Yadav had written to Disinvestment Minister Arun Jaitley asking that he be given decision-making powers in the sale of Air India. Yadav will now express his concerns/views through the IMG, and the final view will be communicated to the global advisor by the DoD.

Apart from these three PSUs, a global advisor Jardine Fleming has already been appointed for selling off of Air India's Hotel Corporation of India (HCI). According to the Department, all three sales Air India, Indian Airlines and HCI will be completed at around the same time.

Unresolved issues on July 12: The next meeting of the Cabinet Committee on Disinvestment (CCD) is tentatively slated to take place on July 12. The main issues that will be discussed will be those where the administrative ministries in charge of various PSUs had dug in their heels, to delay or prevent selling off of various PSUs. Thus, heavy industries' minister Manohar Joshi had prevented a decision on selling off of the government stake in Maruti Udyog, and petroleum minister Ram Naik argued that no sales should take place in IOC, HPCL, BPCL and IBP since these were of `strategic importance'. While it is more or less decided that IOC will not be privatised in the near future, decisions on HPCL, BPCL and IBP will be discussed on July 12.

It will also be debated as to whether the government needs to hold on to its stake in Maruti Udyog for `countervailing' purposes. In an earlier, Cabinet decision, the government had said that apart from `strategic' PSUs, it may hold on to a few others, if its presence was important to prevent, say, the private-sector players from cartelising to rip off the customers. This is the decision referred to by Manohar Joshi while arguing that Maruti should not be fully privatised. So it will be debated if the government's presence is required in Maruti to prevent car prices from rising.

Tomorrow the CoS would also take up proposals for disinvestment in 14 PSUs where CCD has already given an in-principle clearance. The views would then be presented in the CCD meeting of July 12. After which DoD would appoint global advisers in these PSUs which includes the likes of IBP, STC, MMTC, Shipping Corporation etc.