The Hindu : National : Arun Shourie rebuts CAG's observations

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Thursday, May 12, 2005

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National

Arun Shourie rebuts CAG's observations

R. Gopalakrishnan

"Centaur Hotel sale was done fully in conformity with procedures followed from 1991"

"The CAG was straining at the net, after letting the elephant go through the DVB case"

Making a point: Arun Shourie — Photo: Bijoy Ghosh

CHENNAI: The strategic sale of the Hotel Corporation of India's Centaur Hotel in Juhu, Mumbai, in 2001-02 during the period of the National Democratic Alliance (NDA) Government was done fully in conformity with procedures followed from 1991, according to Arun Shourie, who was Minister of Disinvestment at that time. He also said that the sale represented a determination to correct India's image as a nation where government decisions are often not carried through.

Also, going back on a disinvestment decision would encourage bidders to withdraw when they found that their bid was well above the reserve price and this would result in losses to the government, he said.

Different standards

Refuting observations made by the Comptroller and Auditor-General of India (CAG) in respect of the deal made with Ajit Kerkar, the lone bidder, Mr. Shourie said the "standards of evidence and scrutiny" applied by CAG "seem to differ a great deal" if one were to consider the CAG report (of May 2004) on disinvestment in the Delhi Vidyut Board (DVB) by the Congress Government of Delhi.

Mr. Shourie said during an interaction with The Hindu that at every stage of disinvestment in all enterprises, decisions were taken after consultations with a committee of joint secretaries, a committee of secretaries headed by the Cabinet Secretary, the Cabinet Committee on Disinvestment and finally the Cabinet itself, as had been the practice since 1991.

Following instances of no bidder turning up or only single bidder coming, the Cabinet decided that in such cases disinvestment would be proceeded with if the other bidders had gone out of the race voluntarily and there was no evidence of a conspiracy.

Other contexts

In respect of the CAG statement that since there was only one bidder the benefit of competition was missed, Mr. Shourie said that even when there was competition, allegations were made that the price was rigged. In the case of Videsh Sanchar Nigam Ltd (VSNL), the Tatas bid Rs. 1,493 crores and Reliance Rs. 1,400 crores. "It was a great boost to us because people said Reliance was evidently not in a position to fix the match or get to know what was happening inside the Ministry." This reflected the efficacy of the system of setting up a data room where every bit of information about a company put on the block was made available to every bidder. However, allegations were still made on the very ground that the bids were quite close.

In the case of Bharat Aluminium, or Balco, the chasm between the Sterlite bid of Rs. 550 crores and the Birlas' bid of Rs. 235 crores was cited as evidence of a conspiracy. It was being seen as a scheme in which one bidder was deliberately quoting low to ensure that the other bagged the deal.

Mr. Shourie said that in many instances of disinvestment, including that of Centaur, opponents of the disinvestment policy employed threats, violence and obstruction, leading to the withdrawal of potential bidders and leaving a single bidder in the field.

Of mudslinging

Citing instances where, after disinvestment, the value of the asset either decreased or increased sharply, he asked whether the Government could be accused on the basis of that of either overpricing or underpricing. "We should do what we think is right, and given the nature of public discourse in India, do it in the knowledge that mudslinging is a sort of one of the conditions of employment." The failure to carry through government policies would have grave consequences for a government's credibility, he pointed out.

About the CAG's remark that he facilitated the financing of the deal, Mr. Shourie said this part of the report was "not worthy of a constitutional authority." Mr. Kerkar had claimed that many banks were prepared to finance him to pay the bid price (Rs. 153 crores).

His Ministry, guided by the experience of the telecommunication sector, where winners often did not pay the bid price, was "not prepared to take Mr. Kerkar's words at their face value." It agreed to meet the bankers brought by Mr. Kerkar and got them to give a commitment towards lending and confirmation by banks' head offices in four days.

Discrepancy

About the Delhi Vidyut Board (DVB), Mr. Shourie said CAG had remarked that single bidders were not only called for negotiations but allowed a dilution of norms on power loss reduction.

Also, there was a discrepancy to the extent of Rs. 1,107 crores between figures of receivables furnished by the balance-sheet and by the consultant to the Delhi Government.

The basic figures adopted, the weightages given and the assumptions made were not indicated. "Still the CAG passed no strictures'' in the case. "The standards of evidence required and of scrutiny certainly seem to differ a great deal,'' Mr. Shourie commented. In raising minute technical details in the Centaur case, CAG was "straining at the net, after letting the elephant go through the DVB case,'' Mr. Shourie said.

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