"The deal was like loot of Chattisgarh in a day-light robbery.

"

- Chattisgarh Chief Minister, Ajit Jogi.

"Sterlite's offer for Balco is more than fair. It is in the interest of the government to
close the deal."

- BusinessWorld, March 12, 2001.

Introduction
In February 2001, the Government of India
(GoI) struck its first disinvestment deal in
the fiscal 2000-01. It approved the sale of its
51% stake in aluminium major, Bharat
Aluminium Co Ltd (Balco) to Sterlite
Industries Ltd. (SIL), for Rs. 551.5 crores.
Balco was a profit making public sector
company under the Ministry of Mines
(MoM).

In 2000, it had a turnover of Rs.898 crores

and a profit after tax of Rs. 56 crores. Balco
had two working units - an integrated
Aluminium complex situated at Korba in
Chhattisgarh and the second at Bidhanbag in
West Bengal equipped to produce only on
downstream facilities. Balco had a total
workforce of 7,000.

The Opposition launched a massive attack accusing the BJP Government of 'selling
out' to private interests.

Also, the Chattisgarh Chief Minister, Ajit

Jogi, (Jogi) alleged a Rs. 100 crore kickback
in the sale involving key officials. Jogi also
threatened to cancel the bauxite mining and
land lease Balco was granted as a Public
Sector Unit (PSU) in case the GoI failed to
review the proposal.

Fierce opposition to the Balco-Sterlite deal

forced the BJP government to put off
finalizing the sale agreement till the matter
was discussed in the Parliament. In March
2001, the Parliament approved the
controversial deal with the opposition-
sponsored motion being rejected in the Lok
Sabha by 239 to 119 votes. But the story did
 not end here.

Balco - A Profile
Balco, incorporated in 1965, was closely associated with the growth of the Indian
Aluminium industry. Balco played a pivotal role in making aluminium a leading
metal with myriad uses ranging from household, industrial to strategic defence and
aerospace applications.

Balco was vertically integrated from

sourcing of bauxite from its captive mines,
refining and smelting to aluminium
production and a variety of semi finished
products.

Balco had contributed significantly as a

primary aluminium producer, providing
sustenance to vital industries. Balco was a
supplier of special aluminium alloys to the
nation's intermediate range ballistic missile,
Agni and surface to surface missile, Prithvi.
The GoI held 100% stake in Balco.

In 2000, the GoI announced to divest 51%

stake in Balco to a long-term strategic
partner...

Stage I: The Tug of War

In mid 2000, leading domestic players like the Aditya Birla group company-Hindalco
Ltd, SIL and the global major, Alcoa, expressed their interest to acquire 51%
controlling stake in Balco. They had to verify the financial and operating
performances of Balco before putting in a financial bid for purchasing the 51% equity
on offer...

Stage II: The Controversy

Deepens
The deal between the GoI and SIL had
attracted considerable flak mainly from the
Opposition. There was a niggling doubt over
the deal, which seemed to be a reflection of
the lack of transparency. The GoI said that
the bids were valued by four different
methods. However, the value arrived at by
these bids was not disclosed. Again, the
reserve price was not disclosed nor the value
of the bids by Hindalco and Alcoa and
whether they were higher or lower than the
reserve price...

Stage III: The Debate

Meanwhile, the Opposition demanded a Joint Parliamentary Committee (JPC) probe
into the Balco deal. The GoI rejected the demand for a JPC probe leading to a walkout
by the entire Opposition in the Rajya Sabha...

Stage IV: Post Sell Out

Drama
After the sell out of Balco, Jogi continued to
fire his salvo and demanded a parliamentary
probe into the deal.

Jogi alleged that the company was sold at a

tenth of its actual value.

He said, "In a deal in which property worth

Rs.5,000 crore to Rs.6,000 crore (Rs.50 to
60 billion) is being sold for just Rs.551 crore
(Rs.5.51 billion), the circumstances speak
for themselves."...

All's (Not) Well that Ends Well

The workers were not happy with the agreement and dubbed it as 'a face saving'
exercise. 'We could have very easily bargained for a better deal if only we had
negotiated earlier. Our bargaining powers got considerably reduced when the
management realized that we were cracking under pressure' the workers said...