Market dominance not to affect HZL disinvestment process

Ravi Kapoor

New Delhi, June 6: THE issue of market dominance will not affect the privatisation of Hindustan Zinc Ltd (HZL). Divestment in HZL is in an advanced stage.

Since zinc is now on the open general licence (OGL) list, there is little threat of monopolistic practice in the domestic market. This is how the department of disinvestment (DoD) views the situation, official sources said.
The issue of monopoly in the domestic zinc market came up at the recent meeting of the inter-ministerial group (IMG) that was set up to monitor the course of HZL divestment. The IMG comprises representatives from the ministries of mines and minerals, finance, heavy industries and public enterprises, and the DoD.

Sources said that it was pointed out at the IMG that if the Binani group takes over HZL, the group will have total control over the domestic zinc industry. For, Binani is the only other manufacturer of zinc. The DoD is of the opinion that what the government should be worried about is the abuse of market dominance, not market dominance per se. The abuse will be taken care of by the competition legislation that is being currently formulated. In any case, in the post-WTO scenario, the chances of monopolistic malpractice are minimal, sources said.

According to the DoD, bigger companies in any sector are better for the reasons of economies of scale. At present, India is able to meet 85 per cent of its zinc requirement by indigenous production. While HZL produces around 1,50,000 tonne of zinc per year, Binani’s production stands at 30,000 tonne per year.

A consensus is emerging within the IMG which seems to have accepted the DoD’s view over the monopoly issue. HZL privatisation is going on quite smoothly, sources said, adding, the process of shortlisting bidders has been completed. The bidders have completed the process of due diligence.

As per the decision of the Cabinet committee on disinvestment, the government will sell 26 per cent of its equity in HZL. The government holds 76 per cent shares in the zinc major.

The authorised capital of HZL is Rs 500 crore, whereas the paid-up capital stands at Rs 422.53 crore. The company, which enjoys the mini-ratna status, earned a profit of Rs 151.15 crore in 1998-99. In the first three quarters of the current fiscal, the company posted a profit of Rs 143 crore.