ANOTHER SORDID DISINVESTMENT SCAM

Election Time Is Rudy Time For Vajpayee & Co.

                                                                   Dipankar Mukherjee

IT was New Year eve as well as election-eve for the union civil aviation minister, Rajiv Pratap Rudy, and he chose Airport Authority of India Ltd, a profit making PSU under his ministry, for footing his hotel bill at Goa. When caught, he paid it from his personal account.

It is election eve and the Vajpayee government has made a rush to the market to sell government shares of six PSUs, including two Navratnas – ONGC & GAIL, so that budgetary deficit can be made up before March 31, 2004. Why this deficit? As the government had to give pre-electoral sops of Rs 12,000 crore to those who `shine’ in NDA rule – corporates, MNCs, share market operators etc. for cheaper air travel, cheaper foreign liquor, less import duty, tax concessions, etc. Deficit because government had to spend before election, hundreds of crores of rupees on pre-election campaign through government departments, to make people `feel good’.

If Rudy had the spectre of post election scenario – “Kal Ho Na Ho” and hence to enjoy at the cost of a PSU before election, so has the Vajpayee government, despite all bravado, a dismal prospect of come back.  So give a parting electoral gift to the rich, enjoy electoral extravaganza, all at the expense of 106 crore of people who hold the shares of  PSUs through president of India. The government of the day is only the Trustee of the shares on behalf of the people. But the caretaker government is flouting the trust to cover up its financial profligacy.  In the case of Rudy, it was an individual minister milching a much maligned PSU, but this Vajpayee government has institutionalised global loot of the pride of India – its Navratnas, through either strategic sale or sale of shares in block in the market. Rudy, when caught, could pay from his pocket, but who will give  back the Indian people their  irreplaceable assets like GAIL and ONGC?

It may be recalled when the NDA government came to power, it sold 25 per cent government shares of GAIL in November 1999 at a grossly under-priced value of Rs 70 per share. There was a furore inside the parliament and outside that the share was priced 3 to 4 times less than the actual value which meant a loss of not less than Rs 1,500 crore to the exchequer.   Incidentally most of the 25 per cent shares were acquired by M/s British Gas and Enron, global competitors of GAIL.   Now, when 10 per cent of government’s share in ONGC & GAIL is being rushed for distress sale, the loss would be in the tune of not less than Rs 5000 to Rs 6000 crore. The following details would make it abundantly clear, how this huge amount of public money is being compromised in this deal to please the Foreign Investors (FIs) and Foreign Institutional Investors (FIIs) who are keen to acquire the control, in a gradual manner, of these irreplaceable asset-bases and natural resources of India, with minimum investment in a highly manipulated share market.

ONGC

          Shares offered for sale                                 -  142.5 million (10 per cent of total holding)

           Offer Price/Share                                        - Rs 680-750

          Earning per share (in 2002-2003)                - Rs 74

           Price Earning Ratio                                      - 9.2 to 10.1

           Expected earning  from disinvestment     - Rs 9,690 crore to Rs 10,875 crore

           Govt. share after disinvestment                 - 74 per cent

GAIL

          Shares offered for sale                                  - 84.6 million (10 per cent total holding)

          Offer price/Share                                          - Rs 185

          Earning per share (in 2002-2003)                - Rs 19.38

          Price Earning Ratio                                     - 9.5

          Expected earning from disinvestment    - Rs1,565 crore

          Govt. share after disinvestment              - 57 per cent

          (25 per cent shares were earlier disinvested in November 1999)

In international market, the price-earning ratio (i.e. offered share price divided by earning per share) of similar oil/gas based companies like ONGC & GAIL, would not be less than 15 to 20. That means, the standard norm for sale of shares in block is fixing the offer price at a level of 15 to 20 times the earning per share as generally being followed by the global oil majors like BP, Exxon-Mobil, Royal Dutch Petroleum etc. In case of ONGC and GAIL, it was fixed at around 9 to 10 times of the earning per share that too calculated in a highly manipulative share market. Moreover in case of PSUs, the equity base is comparatively larger than the similarly placed private companies, and thus the price-earning ratio should be comparatively higher and the fixing of offer prices should be based on an even higher multiple than the usual 15-20 times. But in the election-eve off-loading ceremony, the Shouri and Co decided to grossly under-price the share at a multiple of 9/10 of the earning per share and made a bonanza to the foreign investors in the stage-managed self-congratulatory noise created through media and the capitalist lobby regarding the so called high-pitch response in market. Even if the actual share value of ONGC and GAIL is computed at the minimum price earning ratio of 15, the country has already lost about Rs 5,000 to Rs 6,000 crore in the recent sale of shares thus giving rise to another sordid disinvestment scam, perpetrated by the present government.

Whether in disinvestments through strategic sale or through market-sale of shares, the government has always refused to value the assets on the basis of replacement value and has gone for valuation of assets through either Discounted cash flow method or through share valuation as per manipulated market which in turn has, in every case of disinvestment, led to gross under valuation, and therefore to the biggest ever scam in post-independent India in the name of disinvestment/privatisation. It has always gone for a distress sale to makeup its budgetary deficit and in the process has gifted thousands of crores of public money to domestic and foreign investors. Vajpayee & Co. should not be allowed to get away with another Rs 5,000 to Rs 6,000 crore worth scam, just before election, at the cost of India’s pride and MNC’s envy viz ONGC & GAIL, to meet NDA’s electoral expense.  The Election Commission as well as the president of India should stall this sale notwithstanding the hullabaloo created by Shourie's drummer boys in the corporate sector and media, so that in future no government can treat election time as looting- time for misusing and liquidating public assets, built by common mans’s money.