Nothing symbolises government sloth more than the VSNL saga that first began in 2002 when the Vajpayee government sold a 25% stake in VSNL to Tata Communciations for R1,439 crore. Along with their small pre-privatisation stake in VSNL and the shares purchased through an open offer, this allowed the Tatas to take control. At that point, VSNL had 773 acres of surplus land, including 70 acres in the posh south Delhi Greater Kailash area—the government had pre-specified that the deal would not include this surplus land and that this would be demerged; since this would take some time, it was agreed that this could be done at a later date.
Naturally, since the capital value of the land was to accrue to the pre-privatisation shareholders, the Tatas said they would not pay the stamp duty when it was transferred to the joint venture—in the two-step process worked out, the Tatas would hold 50% of the equity in the SPV to mirror their holdings in VSNL and, then, the Tatas would transfer the equity to VSNL’s pre-privatisation shareholders. While the Vajpayee government took no decision on the issue of the stamp duty—there was no reason for it not to since the Tata stand was a perfectly rational one—it took another eight years, till July 2012, for the Cabinet to finally clear a proposal to demerge the land from VSNL into a subsidiary.
Meanwhile, since Tata Communications needed to shed its debt, it was trying to raise some funds by diluting its equity, but couldn’t do so since the government wasn’t certain what this would do to the land holdings—with the government denying permission to dilute equity, the excessively leveraged Tata Communications had no option but to continue to service high-cost debt. Since the government continued to dilly-dally on the tax exemption, Tatas even proposed to buy the land at a fair value, but there was no movement on this either. And now, 14 years after the Tatas first bought VSNL, finance minister Arun Jaitley has moved a Bill—the Lok Sabha has passed it—which exempts asset sales by PSUs from capital gains tax. With this done, hopefully, Tata Communications will finally be rid of this baggage from the past—VSNL’s erstwhile shareholders, including the government, could well be seeing gains upwards of R10,000 crore. But imagine the loss for a company that has had to wait for 14 years for a simple agreement with the government to be honoured, and which had to pile up expensive debt as a result. More important, if this is is the urgency the government shows when it stands to gain huge amounts, imagine how it functions when it is the private sector that stands to gain.