Privatisation of Vizag steel plant illegal, not in public interest: EAS Sarma

Visakhapatnam: Former Union Secretary EAS Sarma has urged the Department of Investment and Public Asset Management (DIPAM) and the Steel Ministry to review the proposal of privatisation of RINL-Visakhapatnam steel plant as it was neither legal nor in public interest. In a letter addressed to Secretary of DIPAM T.K. Pandey and Secretary-Union Ministry of steel […]

Visakhapatnam: Former Union Secretary EAS Sarma has urged the Department of Investment and Public Asset Management (DIPAM) and the Steel Ministry to review the proposal of privatisation of RINL-Visakhapatnam steel plant as it was neither legal nor in public interest.

In a letter addressed to Secretary of DIPAM T.K. Pandey and Secretary-Union Ministry of steel P.K. Tripathi here on Tuesday, he observed that had the departments adequately briefed the Cabinet Committee on Economic Affairs (CCEA) on the implications of the proposal, the CCEA would not have taken a decision in haste on privatising the RINL.

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Recalling that the RINL had come into existence when there was a widespread public agitation in Visakhapatnam for setting up a steel plant here and after a series of debates on the subject in the Parliament, finally acceding to the public demand, Dr. Sarma said more than 20,000 acres of fertile agricultural land was acquired for the plant in pursuance of the then existing land acquisition law. When the farmers initially protested, the State government had clarified to them that the land was being acquired under Section 3(f)(iv) of the and Acquisition Act as it existed then, which clearly implied that the land would be used exclusively for a “public purpose” defined in that clause as for a corporation “wholly owned or controlled by the government”.

“A 100% disinvestment of RINL would imply a change in the ownership of the company and an outright violation of the letter and the spirit of Section 3(f)(iv) of the Act and it would also amount to a serious breach of the public trust. Had this position been explained to the CCEA, the latter would have had second thoughts, as the CCEA could not have done something that is prima facie illegal. You may consult the Law Ministry on this if necessary,” he stated.

Also, the proposal of monetising the surplus lands of disinvestment-bound PSUs also attracted the same laws, he pointed out. Moreover, it was the AP State government that had faced the farmers whose lands were taken for setting up the steel plant decades ago. It was the State that negotiated on this with the farmers. As such, upholding the federal spirit that underlies the Constitution, the Centre ought to have consulted the State before rushing into this proposal to change the ownership structure of RINL, he opined.

Noting that the process adopted in the disinvestment of RINL also violated the disinvestment policy of the government, he recalled that the Ministry of Steel had earlier entered into an MoU with a South Korean company, POSCO and the MoU contained a highly objectionable confidentiality clause in addition to a tacit approval for Singapore-based arbitration in the event of any dispute arising. He recalled that India has had an unhappy experience so far with such overseas arbitration proceedings as in the case of Cairn and Vodafone.

POSCO was expected to get 50% of the equity and the rest earmarked for a domestic company. In no way did this approach conform to the disinvestment norms, he stated.

Dr. Sarma also argued that contention that privatisation would contribute to the growth of RINL is misplaced as RINL’s contribution to the national economy is already considerable and its profits would have increased significantly had the Centre allotted a captive mine of good quality iron ore to RINL, a largesse that is usually given by the Centre to the private companies. The National Steel Policy, approved by the Union Cabinet, envisages that steel PSUs like RINL would be groomed into becoming world leaders in the steel sector. The proposed disinvestment in respect of RINL is diametrically opposite to this, he observed.

Besides, the track record of those private companies in India which acquired public assets had not been quite satisfactory, he noted, and cited the example of Hindustan Zinc Ltd. in Visakhapatnam where HZL’s zinc smelter was taken over by the Vedanta Group. “The smelter has been mismanaged and the unit stands closed down. The company is now trying to hoodwink the Centre into allowing it to appropriate the land for diversion for commercial purposes, which is prima facie illegal, he said.

“I may also point out that, with the relaxations allowed in the FDI limits, companies being hived off to private companies may slip into foreign hands soon. I would not be surprised if the Chinese acquire RINL once it becomes a private company. Is the Centre aware of this possibility?,” he wondered.

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