Govt to disinvest more in Balco

Govt to disinvest more in Balco
AGENCIES

NEW DELHI, FEB 4: Board of directors of public sector Bharat Aluminium Company (Balco) has approved a proposal to write off nearly ten per cent of its equity prior to privatisation. Government had earlier permitted the company to dilute the equity stake of the company, official sources told PTI. As a result, Balco’s paid up equity capital will now stand reduced to Rs 220.62 crore down from the previous Rs 244.42 crore. The total amount of equity sought to be written-off is placed at Rs 23.80 crore.

The decision to dilute equity has been taken subsequent to the fact that the aluminium major had decided to write off the expenditure incurred on its Gandhamardhan project in Orissa. The need for writing off the equity at this late stage has also been felt on account of the fact that these liabilities have to be cleared off before proceeding with disinvestment.

However, sources added that the impact of this decision on the disinvestment of the company was not yet clear. The government had earlier decided to sell 51 per cent of its equity in the PSU to a strategic partner. It has mandated merchant banker Jardine Fleming to act the global advisor to the disinvestment process.

Three players have been short-listed by the government for acquiring majority stake in Balco namely North American aluminium major Alcoa and domestic aluminium palyers Hindalco and Sterlite Industries. A V Birla group chairman Kumarmangalam Birla had earlier announced that it was joining hands with Alcoa for acquiring 51% stake in Balco.

Gandhamardhan project has been embroiled in controversy since its inception in 1982. The project was to be developed for mining bauxite reserves at an estimated cost of Rs 31 crore.

The project ran into trouble on account of delays in acquisition of forest and non-forest lands as well as on receipt of environmental clearences. Further, agitation by the local people aggrevated delays.

After repeated attempts by the company to operationalise the project failed to bear fruit and the company stopped construction work on the project in December, 1985. The mine ministry had in 1993 approved a proposal for abandoning the project with a provision for writing off expenditure to the tune of Rs 34 crore.

Subsequent to this the mines ministry had in June, 2000 approved a proposal for the write off of equity.

Under the articles of association, the company is authorised to pass a resolution to this effect. Balco will petition under Section 101 of Companies Act to the Department of Company Affairs seeking its approval for the same.