The sale of governments residual stake of 29.54% in Hindustan Zinc (HZL) to Anil Agarwals Vedanta Group is not going to take place anytime soon. This is because the government has decided that it will first amend the Metal Corporation (Nationalisation and Miscellaneous Provisions) Act, 1976, which will enable it to sell its balance stake in the company.
According to the draft Cabinet note prepared by the mines ministry on the subject, a Bill to amend the Act will be brought before the Cabinet within three months of the approval of the proposal by it.
The rationale put forward by the mines ministry for first amending the Act is that the Metal Corporation (Nationalisation and Miscellaneous provisions) Act, 1976, through which HZL was created still exists on the statute book and the Supreme Court in its judgment in 2003 in the matter of similar sale in HPCL and BPCL did not reverse the law. Therefore, the ministry has concluded that further sale of government holding in HZL will require amendment of the Act.
The mines ministry has also said that the law ministry has all along in its opinions in the years 2005, 2012 and twice in 2013 maintained that any further equity sale in HZL cannot be done without suitably amending the Act.
In July this year,
attorney general GE Vahanvati did suggest that the government could take a policy decision for sale of shares in the open market provided the prevailing market price is considered fair. The Cabinet note has said, that He has, however, not said conclusively that the suggested action can be proceeded with without amending the Act.
The AG had earlier given his opinion that HZL was no longer a government company and that the stake sale could proceed so long as the price discovery was through an open auction.
The latest development comes as a setback to that perception.
In a recent interview with FE, Agarwal had said that he wanted to buy the residual government stake for housekeeping as then, the structure of the company would be clear.
On the governments decision to sell the stake through open auction, Agarwal had said: It is not very fine with us, but we are okay with it. Once this happens, it would become a normal public company.
The Cabinet note says that although HZL is not a government company as on date (Agarwals company now holds 65% stake in it), it