Basic reasons for selling a government stake in these companies are twofold. The first one is more of a change in perspective --government machinery should be used for governing the affaires of the state and not in running commercial establishment. The second is to raise finances for the resource-starved government.
There has been opposition and criticism against the disinvestment process. It was both on the very idea of disinvestment as well as on the way in which government holding in the PSUs are being sold.
BALCO, the government-owned aluminum company, was sold to Sterlite group a few months ago. The sale was opposed by many accusing the government of selling the company at a substantially low price. The valuation process as well as the people involved in the entire exercise of handing over the control of BALCO to the Sterlite group became controversial.
To make the process of disinvestment transparent and to be politically correct, the government has issued guidelines prescribing the qualification criteria for advisors to the government for disinvestment transactions and for bidders for stakes in Public Sector Enterprises.
One becomes disqualified as an advisor in the case of conviction by a court of law or a regulatory authority for a grave offence. Grave offence is one that outrages the moral sense of the community. If an adverse legal action takes place after the entity has already been appointed as advisor, the government will have the liberty to terminate the appointment. An appeal against this will not allow the party to participate in the disinvestment process and government has the discretion to decide on the period of disqualification. However, a Show Cause Notice will be issued to the advisor as to why it should not be disqualified and will be given an opportunity to explain its position.
For bidders, in addition to the conditions for advisers, the ability to manage the PSU when it is disinvested will be ascertained along with matters related to the security and integrity of the country. On security issues, the guidelines say any charge sheet by an agency of government or conviction by a court of law for an offence against the interest of security and integrity of the country committed by the bidding partner or by any of its sister concerns will result in disqualification. Here also, it must by way of a Show Cause Notice demonstrate why it should not be disqualified. The Show Cause Notice will be issued and the PSU will be given an opportunity to explain its position.
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