In what could be a possible hindrance to the government's plans to divest its residual stake in Hindustan Zinc (HZL) and Balco, the Supreme Court has sought explanation from the finance ministry's disinvestment department, mines ministry, Vedanta Group's Sterlite Ventures, HZL and CBI on a petition against the stake sale.
The petitioner, National Confederation of Officers Association of Central Public Sector Enterprises, sought a stay on sale of residual stakes in HZL till the Metal Corporation (Nationalisation and Miscellaneous Provisions) Act, 1976, is amended for this purpose. It also sought to stall the divestment till a CBI inquiry into earlier stake sales of HZL and Balco by the Centre is completed.
“The petitioners are not questioning the policy of disinvestment of the Government of India per se but are challenging only its applicability in view of the fact that neither the said company is a loss incurring unit nor the disinvestment is in the larger public interest,” stated the petition.
The government plans to raise at least R15,000 crore in FY15 through the residual stake it holds in HZL and Balco. The Centre holds 29.5% in HZL and 49% in Balco. Anil Agarwal's Vedanta Resources acquired the majority shareholding of the two companies in 2003 from the central government. It is the valuation of those deals which CBI started looking into in December 2013.
Government sources told FE that the Centre is likely to respond by presenting to SC the attorney general Goolam Vahanvati's opinion on the issue. Last year, Vahanvati and the law ministry had held that the residual stake can go ahead without amending the Metal Corporation Act and that the CBI investigation would have no bearing on any future stake sale in HZL or Balco.
Although the Supreme Court has not fixed a time frame for the Centre to reply back with its legal standing, officials say that the mines secretary could reply within a month's time of the notice being issued.
Sources said that any further steps would be taken based on whether the Supreme Court dismisses or accepts the writ petition. “If the SC directs the Centre to take a re-look at the provisions of the Metals Corporation Act, then it is up to the government and the Cabinet of the day to decide whether to amend it and place it in front of the Parliament of the day,” a senior finance ministry official told FE.