Southern States - Andhra Pradesh-Hyderabad

Yanamala sets the record straight on NSL units' sale

By Our Special Correspondent

HYDERABAD May 7. The Finance Minister, Yanamala Ramakrishnudu, has justified the Government's decision to sell four units of Nizam Sugar Limited (NSL) to Delta Paper Mills (DPM) Limited, saying that it was done in ``public interest.''

He said the Government had been financing the losses of NSL from year to year. Even if the Government were to finance the Rs. 17-crore loss as a one-time arrangement, it would be economical to save the recurring annual commitment of about Rs. 50 crores for the NSL in the years to come.

On the other hand, DPM was expected to infuse substantial amounts towards capital expenditure for the development of these units. It was contributing Rs. 10.20 crores as equity capital immediately on signing the sale and purchase agreement and a further amount of Rs. 12.50 crores towards loans/ capital, aggregating to an investment of Rs. 22.70 crores in the new company.

Mr. Ramakrishnudu gave these details in a seven-page open letter today to the Leader of the Opposition, Y. S. Rajasekhara Reddy, who had raised certain doubts over the transaction in a letter to the Chief Minister last month. Further, the Congress MLAs, M. V. Mysoora Reddy and P. Goverdhan Reddy, had levelled other allegations.

Describing these charges as baseless, the Finance Minister said the owner of Delta Paper Mill, G. Ganga Raju, was a close relation of a former Congress Minister, belying the claim that people close to the Chief Minister had been favoured.

DPM Limited, he said, had been selected since its joint venture proposal was better than that the second bidder, M/s GELCON. The value offered by the latter for transfer/sale of assets was Rs. 53 crores as against Rs. 65.40 crores by DPM Limited.

The joint venture proposal of DPM Limited was higher than the estimated realisable value of Rs. 61.30 crores for the four units which was arrived at by professional valuers. The estimated net realisable value was the appropriate index for comparison of the bids under privatisation but not the estimated replacement value mentioned by Dr. Mysoora Reddy.

He said the DPM had to provide corporate guarantee for redemption of preference shares and debentures issued to the Government. As per the business plan of Rs. 175 crores submitted by DPM, it proposed to complete its investment plan before fourth year of its operation starting with Rs. 8 crores in the first year. Thus it was not logical to believe that the DPM might desert the company during the fifth year, he said.

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