New Delhi: The Comptroller and Auditor General on Friday criticised the previous NDA government for undervaluation of a number of PSUs, including Balco and VSNL, where equity was disinvested.
"Audit examination reveal instances of far too conservative assumptions made by the global advisors in seven out of nine PSUs. The assumptions had the potential of adversely impacting the business valuation, based on which the reserve price was fixed for disinvestment," CAG said in a report on disinvestment during 1999-2003.
"Audit noticed a general trend in the disinvestment of PSUs that majority of bidders, who had initially submitted Expression of Interest, withdrew during the process during due diligence limiting the competition," the report tabled in Parliament said.
It said as many as 48 out of the 70 parties interested in becoming strategic partners had withdrawn and only in two cases (IBP and IPCL) more than two financial bids were received indicating that the competitive tension generated in the process was not encouraging enough to have maximised the value of stake under disinvestent.
The CAG attributed the lack of adequate interest among the prospective investors to the failure of global advisors, who were unable to generate adequate competition at the bidding stage.
"The Government also constituted to this situation by delaying crucial decisions, affecting the financial health of the PSUs," it said.
The report also said that the exercise of asset valuation did not appear to have been undertaken with due seriousness in as much as the valuers were generally not given enough time and core and non-core assets had not been segregated before valuation.
"As a result, the land was still in custody of the disinvested company in which the buyer had management control and could acquire majority shareholding," CAG said.
"In case of CMC, PPL, IPCL, IBP and Modern Foods, the government had put options while in Balco and VSNL the strategic partners had call option. In case of Hindustan Teleprinters, no such option was incorporated," CAG said.
The report also criticised the government for including Post-Closing Adjustment Clause under which the strategic partners could claim compensation from the Government for liabilities arising out of the information that was not disclosed earlier.
In case of Modern Foods, the buyer had claimed Rs 17.48 crore as compensation and the government has already paid Rs 12.64 crore to it. The claims of Balco, Hindustan Teleprinters and Paradeep Phosphates were still under consideration of the Government.
For future disinvestment, CAG has advised the Government to fix accountability of all involved in the process, ensure coordination between various arms of the Government and operationalise the National Investment Fund so that end use of the funds could be monitored.
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