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Ravi Kapoor
New Delhi, June 8: The Disinvestment Commission has recommended divestment of 51 per cent equity in Minerals & Metals Trading Corporation (MMTC) through strategic sale.
In its tenth report released here on Tuesday, the commission has also recommended 20-25 per cent disinvestment in National Mineral Development Corporation (NMDC), deferment of disinvestment in Oil & Natural Gas Corporation (ONGC) and 51 per cent disinvestment in Paradeep Phosphates Ltd (PPL).
According to the commission, "no public purpose would be served by retaining" MMTC, PPL and Project & Equipment Corporation (PEC) under government control. Classifying MMTC as non-core industry, the commission pointed out, "After the progressive de-canalisation and liberalisation of trade, MMTC's dependence on government-related trade has decreased considerably, from about 50 per cent to 33 per cent."
Further, MMTC has been incurring operating losses (after interest) on account of the low trading margins and the high employee-related cost, thereport says. MMTC's manpower strength of about 3,400 is substantially in excess of the sustainable level.
However, "MMTC's expertise in trading and infrastructure, that it has developed over these years, could be of interest to a prospective buyer."
The commission report considers MMTC's large network, with 50 domestic and seven international offices, and strong capital structure with a low debt-to-equity ratio of 0.18 to be the corporation's strengths. Before its strategic sale, the canalised export of iron ore by MMTC will need to be transferred to another agency such as NMDC.
The commission has recommended that the disinvestment in ONGC should be deferred until investor confidence improves. "Both the government and ONGC would have to develop specific action plans to enable achievement of this objective. Thereafter, disinvestment can take place in the foreign and domestic market up to 49 per cent when market conditions are favourable."
In its third report, too, the commission had recommendeddisinvestment in ONGC "after the organisational changes are in position and the new pricing policy is known."
The report has categorised NMDC as "core" given the large reserves and the quality of iron ore NMDC owns, its strategic importance to the Indian steel industry and the absence of effective regulatory mechanisms in exploration and export of this mineral.
It notes that the operations of NMDC have been consistently improving and have improved its net worth subtantially over the last five years. The commission is favourably disposed towards NMDC's proposal to get into exploration and mining of non-iron metals in African countries.
"In order to attract one of the best mining companies globally to join hands with NMDC in their overseas ventures, the commission is of the veiw that GoI could offer up to 20-25 per cent of NMDC shares" to a foreign partner, the report says.
Classifying PPL as "non-core," the DC has recommended divestment of not less than 51 per cent government holding in PPL through astrategic sale. "Government ownership of production facilities is neither necessary nor justified."
The DC report has suggested another round of financial restructuring at PPL with an infusion of Rs 70 crore "which will enable PPL to start its operations on a clean slate."
The company's net worth was almost wiped out in 1992-93 and it was on the verge of being declared sick. The central government stepped in with a financial restructuring package which involved conversion of government loan into equity and preference shares.
PEC, whose paid-up capital of Rs 1.5 crore is held by the government, was originally created as a division of STC. It became PEC Ltd in 1997. The commission has recommended the enlargement of the scope of exports from small and medium industries through it.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.
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