It's perhaps a lesson for India's Disinvestment Ministry. It is now forced to look at the environment liabilities that would be part of the baggage during a hiving-off process. True, the entire sticky business of selling off the gargantuan public sector undertakings has not been a cake-walk, though it started with much aplomb. However, it remains a big issue even if the initial rush of foreign buyers for our gigantic public sector concerns has been on the wane.
The blame has mostly been laid at the door of Indian system's slow pace of functioning and the massive labour problems. But what is so often overlooked and is now fast emerging as one of the major impediments in the sell-off process is the concerns of foreign bidders over environmental liability. They are essentially wary of what environmental baggage they might be taking on as a result of the long period of government ownership.
The most significant pointer to this is the low bids received by some of the profit-making public sector monopolies. Take Hindustan Zinc Ltd (hzl), for instance. The company received a lone bid, that too falling below the reserve price. Other factors like impossible conditions of sale apart, the issue of environment liabilities is a reality government must take a hard look at. Perhaps for this reason, the government is undertaking an environment audit of hzl before putting it up for sale again. But that is not enough.
Foreign bidders are keen on the government taking responsibility for the entire liability that may crop up after sale because of past actions. However, the government has so far sought to limit its responsibility to the sale price and attach a limitation on how much later such claims can come up.
With the idea of environment liability now gaining currency in India, government needs to be more forward-looking on it. Since public sector undertakings are known to be especially notorious for their singular lack of environmental concerns, it is very important that government takes a good, hard look at this aspect of the companies, both for the present and the future. It may have to pick up a big bill later but the beneficiaries are only Indians and the Indian environment. Unless this is done post haste, private companies will remain very hesitant to take up loss-making and environmentally hazardous units.
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