Sell-off norms

Rules being framed for disinvestment of natural resource-based PSUs

Published: Sunday 15 June 2003

the Union government is in the process of drafting a new set of rules for the disinvestment of natural resource-based public sector companies. The new guidelines will apply to units dealing with mines and extraction of minerals. The Union ministry of disinvestment had decided to issue the new set of rules in December 2002 in the face of widespread public protests against disinvestment.

Though little is known about the nature of these guidelines, official sources involved in the exercise reveal that the rules will deal with "extraction related industries linked to depletability". This, in effect, means that the guidelines would bring into its purview all public sector undertakings (psus) engaged in the extraction of depleting minerals such as bauxite, copper, iron, manganese and zinc.

Coal and oil are, however, likely to be excluded. Oil companies will be kept out because of the Union government's decision not to proceed with disinvestment in such companies. As for coal public companies, the reason is the Coal Nationalisation Act, which does not permit privatisation in this sector.

Officials also say that if a particular natural resource that can deplete has a well-developed world market, and has adequate access to it, it is unlikely to be covered by the new norms. But there is still ambiguity over whether this argument would lead to the exclusion of other depleting natural resource units from the disinvestment process.

These norms will address fears associated with privatisation such as the impact on local area development and overexploitation of scarce resources to maximise profits. The possible solutions include compensation for development activities from the disinvestment proceeds, and inserting clauses into the shareholders' agreement requiring private owners to continue development activities by curbing extraction.

Currently, confusion mars the drafting process. Few people are aware of it and even those involved in the drafting process are unclear about the objectives. There are apprehensions that the new guidelines may bypass those likely to be affected. At present, there are approximately 75 protest movements against mining in India. Yet, the government is trying to pave the way for mining companies to commence business. Prime Minister Atal Bihari Vajpayee, in a meeting in December 2002 with private mining companies assured them of less stringent environmental rules.

It remains to be seen if this is not just another novel idea by the government to rein in the opposition.

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