The cryptic press note issued in New Delhi on Thursday by the Cabinet Committee on Economic Affairs, to constitute a committee of secretaries, including the department of legal affairs, department of disinvestment and the ministry of mines, to finalise the government?s stance on the call option notice given by Sterlite Industries to acquire the remaining 49% stake in Balco, leaves a lot unsaid. Sterlite had acquired a 51% stake in the public sector company in March 2001, when the NDA was in power. By the terms of the agreement between Sterlite and the disinvestment department, the former had the right to exercise a call option?that is, an option to buy the government?s residual 49% stake in the aluminium maker. Last year, Sterlite exercised the option (within the stipulated period), and turned over a cheque of Rs 1,098 crore for it?which the successor UPA government returned.
The decision to privatise Balco was politically contested right from the start, with the Congress and Left parties saying that they would revoke it, given a chance. Once in power, the UPA government?s opposition to the sale was bolstered by a Cag report, on the basis of which it even threatened to prosecute the NDA?s disinvestment minister, Arun Shourie, for having approved the sale. The current press note, if anything, is an indication that opposing a transaction whilst in opposition is one thing, reversing it when in power is quite another. The Cag report?s finger-pointing notwithstanding, the current dispensation in New Delhi will find that a deal done is a deal done. The issue now, really, is whether the government should offload its stake unto the public, a la Maruti, or honour Sterlite?s call option. While the Attorney General has advised the government that the call option is ultra vires of the Companies Act, 1956, Sterlite has challenged this in the Delhi High Court. The Sterlite-Balco saga is another example of how economic policies need to be thought through by India?s political parties before they begin opposing them. Opposing a move only because it yields short-term political dividends can make for a sticky situation once in a position of responsibility. Those sharpening their stance on SEZs right now should reflect on this sort of myopia. A party that operates one way in opposition and then tries to superimpose it with varied considerations once in power often invites cynicism.
