Disinvestment and HR issue

Disinvestments
Definition

Genesis Of Disinvestment

Disinvestments
Objectives
To meet the budgetary needs. To improve overall economic efficiency. To reduce fiscal deficit. To diversify the ownership of PSU for enhancing efficiency of individual enterprise. To raise funds for technological up gradation, modernization and expansion of PSUs. To raise funds for golden handshake (VRS)

Disinvestments
Types of Disinvestments
Strategic sale Offer for sale Reduction in Equity Asset Sale and Winding up Management/ Employee Buyout

Disinvestments
Disinvestments process
Already listed profitable CPSEs (not meeting mandatory shareholding of 10%) are to be made compliant by Offer for Sale by Government or by the CPSEs through issue of fresh shares or a combination of both Unlisted CPSEs with no accumulated losses and having earned net profit in three preceding consecutive years are to be listed Follow-on public offers would be considered taking into consideration the needs for capital investment of CPSE, on a case by case basis, and Government could simultaneously or independently offer a portion of its equity shareholding In all cases of disinvestment, the Government would retain at least 51% equity and the management control All cases of disinvestment are to be decided on a case by case basis The Department of Disinvestment is to identify CPSEs in consultation with respective administrative Ministries and submit proposal to Government in cases requiring Offer for Sale of Government equity

Disinvestments

Benefits
Improves efficiency in PSUs through structural adjustments Reduces or mitigate fiscal deficit Introduces competition and market discipline brings about a measure of economic depoliticizes essential services Consumers will be benefited as they would have more choices and cheaper and better quality products and services Releases govts tangible and intangible, such as large manpower currently locked in managing poor performing PSUs, and their time and energy, and deploys them in high priority social activities

HR issues
Loss of public interests Fear of foreign control Issues with workers Less number of bidders Raises conflicts between the government and the employment union of the PSU. Impact on employees

Significant increase in work load and stress Fear regarding job cuts

BALCO case study

Case study on BALCO

Company profile
Incorporated in the year 1965. Core business making aluminium a leading metal with myriad.
Korba Plant Bidhanbag Plant 200,000 tonnes per annum capacity Hot and Cold Rolling Mills (3600 Alumina plant. tonnes capacity). 100,000 tonnes per annum capacity One Extrusion Press (1250 tonnes Smelter. capacity). Three wire rod rolling mills for manufacture of Aluminium redraw Foil Plant (600 tonnes capacity). wire rods. Three Extrusion Presses (3150 tonnes, 2500 tonnes and 800 Conductor Plant. tonnes capacity). Hot and Cold Rolling Mills (40,000 tonnes capacity). 274 MW power plant.

Continoue
Feb 2001 GOI struck with its disinvestment deal of BALCO GOI had 100% holding in BALCO They decided to sale 51% of its stake In yr 2000 turnover of BALCO Rs 898 cr PAT was- Rs 56 cr

HR issues
Issues start with the announcement of disinvestment Employee raised point
BALCO was profit making company Company had huge capital of Rs 500 cr It was the only PSU that paid its 50% equity Government should not jeoparadise the feature of workers

HR issues
Government replay
In late 1990s only 50% of BALCO profit had been accounting for operating profit Other 50% of income due to interest income from fixed deposits BALCO was running on outdated technology Due to high international aluminum price they are making profit

Main HR issues
In Feb 2001 union filed petitions with DCA and MRTPC Petitions contain
Fixation of reserve price before the start of disinvestment process Valuation of company by GOI Non-settlement of pending dues by many of foreign and domestic parties Without valuation of assets of BALCO on fair market value
They ignored new cold rolling project worth of Rs 184 cr They ignored korba plant, bidhanbag plant, land, quarters, and buildings worth of Rs 800 cr

Continoue
Opposition said
Worth of company at over Rs 2900 cr against disinvestment price of Rs 551 cr Valuation of BALCO faulty Companys captive power pant alone could fatch Rs 1050 cr

Post disinvestment HR issues

Worker worried about their survival Protection of their services Profit making company Demand of worker for sustain in the company