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CCD to consider fresh norms for IBP bidding

Our Bureau

NEW DELHI, Oct. 22

THE Cabinet Committee on Disinvestment is slated to meet on Tuesday to consider fresh norms for bidding in IBP Co Ltd and to clear the shareholders' agreement for disinvestment in Hindustan Zinc Ltd and Hotel Corporation of India.

The Disinvestment Ministry is also expected to seek the approval of the CCD to invite price bids for the restructuring/disinvestment in the first tranche of eight hotels belonging to ITDC's Ashok group on sale or long-term structured contract on lease-cu m-management basis.

In the case of IBP, the CCD is expected to rework the guarantee format for enforcing the Rs 2,000-crore investment norm for prospective bidders seeking to acquire 33.58 per cent of the Government's equity in the state-owned petro marketing company.

The Disinvestment Ministry has submitted a revised note to the CCD, incorporating the Petroleum Ministry's consent, to waive the Rs 500-crore bank guarantee clause as a pre-condition for bidding in IBP.

While the Petroleum Ministry had earlier wanted the Government to incorporate a bank guarantee clause as a pre-condition for the bidders, it has now expressed willingness to waive the guarantee norm if suitable safeguards are built into the shareholders' agreement with the prospective buyer.

Besides, the Disinvestment Ministry has built a case for de-linking the mandatory investment of Rs 2,000 crore from inflation and rupee depreciation over time.

De-linking would mean that in real terms, the investment amount is reduced as it diminishes over time due to inflation and rupee depreciation.

The Disinvestment Ministry has also proposed to permit the successful bidder to invest Rs 2,000 crore over a 10-year period as against the six-year term suggested by the Petroleum Ministry.

The Rs 2,000-crore investment norm is in line with the Hydrocarbon Vision 2025 document cleared by the Union Cabinet in March 2000. According to the document, only those companies which had invested Rs 2,000 crore in the refining or upstream sector would be allowed to enter the petro-product distribution segment.

"The revised norms are expected to attract wider participation and infuse competition into the bidding process of IBP," Government sources said.

IBP is the first state-owned oil company to be put on the block for privatisation by the Union Government.

The CCD will also firm up the share holders agreement for the sale of 26 per cent of the Government's equity in HZL to a strategic buyer.

Similarly, the shareholders' agreement for the sale of HCI, a wholly-owned subsidiary of Air India, is expected to be cleared by the CCD.

This will enable the Disinvestment Ministry to proceed with the process of inviting price bids for both these companies from prospective bidders.

During an earlier meeting, the CCD had decided to plough back the proceeds from the sale of HCI into Air India and clean up the balance sheet of the ailing flag carrier.