Third, it is being alleged that the valuation procedure that yielded the undeclared reserve price below which the government was not willing to sell has neither been transparent, nor undertaken by qualified valuers capable of valuing the plant and machinery of the company and the bauxite mines that it has on lease. Keeping the reserve price a secret and declaring that the Sterlite bid was in keeping with the reserve price, only further fuels suspicion. A more transparent procedure would have been to declare what the minimum bid that the government would consider is, based on its independently-conducted valuation.
 
Fourth, the whole procedure has been gone through in much haste. Even though the bids had been invited sometime back, the valuation of the firm, the setting of the reserve price and the acceptance of Sterlite's bid was allegedly done within a month's time. Leaked evidence of undue haste has accumulated, questioning the government's claims of transparency in the execution of the deal.
 
Finally, the deal allegedly violates a Supreme Court order banning private sector units from running mines and industries in tribal areas. To circumvent this obstacle, the government had ostensibly been contemplating a change in the law, which has not actually been gone through with.
 
All of this has generated opposition to the deal to divest a controlling stake in a profit-making public sector unit at what is considered a throw away price. At the time of writing it appears that the deal may not be finalized because of this opposition. Clearly, a combination of an inappropriate procedure, undue haste and unwarranted secrecy have created a veritable mess. The question that remains is why the BJP was willing to go through with this procedure even at the expense of alienating some of its NDA allies.
 
The announcement of the sale close to the end of fiscal 2000-01 and just before the release of the Economic Survey and presentation of the Budget suggests that two different motives have guided the government's actions. The first, of course, is the need to garner some resources through public sector equity sale, so that the "revenue" side of the budget can be padded to some degree, even if not to the tune of the Rs.10,000 crore projected to be yielded by privatization in Budget 2000-01. In fact, given the haste with which the BALCO deal was finalized and the fact that fiscal 2000-01 runs till March-end, it was likely that. if the opposition to the BALCO deal was not as strong, a couple of more deals among the many that are 'pending' may have been pushed through. But that haste and the procedure seems to have made any such new effort difficult.
 
The second motive appears to be the need to establish that the government is serious about pushing ahead with "economic reform" and implementing its intentions to privatize the public sector. Those intentions have not only been declared repeatedly by official spokesmen, but have been made one of the principal steps forward on the economic policy front by the Economic Advisory Council to the Prime Minister and the authors of the recently released Economic Survey. If those declarations were to be taken seriously, a major thrust on the disinvestment front was called for. After all, the recommendations of the now-dissolved Disinvestment Commission have been circulating for a while, a whole ministry has been created to deal with disinvestments and successive budgets have set over-ambitious targets for resources to be garnered from privatization.
 
Driven by these motives, the government has chosen to push through the deal on two grounds. To start with, it argues that the Sterlite offer exceeds that warranted by a reasonable projection of future revenues and indicates that the company is willing to pay a premium for the controlling stake it is being offered in a major player in the aluminium market. Further, much is being made of the fact that Sterlite's offer was more than double the competing bid from rival HINDALCO. What is ignored by this reasoning is that both what the market is willing to offer or the net worth computed on the basis of projections grounded on the current profits of public sector undertakings would not constitute sums which make any privatization exercise worthwhile. Private investors looking for bargains would use valuation procedures which would short change the government. The fact that HINDALCO was willing to offer only half of the undervalued Sterlite bid, only goes to prove this point rather than establish the fairness of the Sterlite offer. This makes difficult to economically justify all but the most unprofitable public sector units. But those are the very companies that no private sector buyer would even consider. Given this, the government should give up its stubborn advocacy of privatization on grounds that have not been supported by the experience in areas like the airline and cellular and basic telephony industries. Instead it should return to implementing plans to reorganize, modernize and expand profitable public sector undertakings, since successful completion of that task would yield revenues for the exchequer that are many multiples of the interest revenue it can garner by investing the proceeds from privatization or save by using it to retire accumulated public debt.