Guidelines for disinvestment transactions issued

By Our Special Correspondent

NEW DELHI, JULY 13. The Government today issued detailed guidelines on the qualifying criteria for advisors and bidders in the disinvestment process. Consequently, it is expected to soon issue show cause notices to companies which had earlier been disqualified from the disinvestment process. These include Indian Airlines and Air India disinvestment, the Hindujas and Videocon, as well as Sterlite Industries which has bid for Hindustan Copper Limited and Hindustan Zinc Limited will now be issued show cause notices under these provisions. Only one advisor, Credit Suisse First Boston, will be issued a show cause notice.

The issuance of the formal guidelines follows a decision taken last week by the Cabinet Committee on Disinvestment on keeping tainted companies out of the privatisation process.

According to the guidelines, show cause notices have to be issued to companies before disqualifying a concern. This will give an opportunity to these companies to explain their position.

The guidelines for disqualification of both advisors and bidders come into effect immediately and would apply to all advisors already appointed by the Government and all bidders for various disinvestment transactions not yet completed.

In the case of advisors, the guidelines stipulate that there should not be any conflict of interest on the date of appointment for handling the transaction. In case, such a conflict arises in the future, the advisor is to immediately inform the Government. The term ``conflict of interest'' is defined as engaging in any activity by the advisor with a third party which would directly or indirectly affect the interests of the Government or the company being disinvested in relation to the ransaction. In addition, this relates to information about the company which could be used to the disadvantage of the Government or the company.

The Department of Disinvestment has noted that such conflict would be deemed to have arisen if any advisor has any professional or commercial relationship with any bidding firm for the same disinvestment transaction during the pendency of the transaction. In this case, sister concerns are not covered by the concern over conflict of interest.

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Section  : National
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