In a first, West Bengal govt to sell stake in a dozen firms
Kolkata: For the first time since Mamata Banerjee took office as West Bengal’s chief minister in 2011, the state is looking to start a programme to restructure enterprises in which it is invested. This will include sale of its stake in at least a dozen companies, starting with a profit-making one.
On Wednesday, the state cabinet approved the sale of the state’s 47% stake in Metro Dairy Ltd to its private partner Keventer Agro Ltd for around Rs84.5 crore, a minister said, asking not to be named. The state government has decided to sell its stake in at least a dozen more joint venture (JV) companies, he added.
Apart from an outright sale of its stake, the state has also identified at least 30 other enterprises to be wound up or amalgamated, according to officials, who, too, asked not to be identified. The restructuring is aimed at cutting the state’s losses, but it has been decided that even when winding down loss-making enterprises, there won’t be any job cuts, they added.
In line with West Bengal’s long tradition of taking over embattled companies to save jobs, Banerjee passed bills in February 2016—the last in her first term as chief minister—to take control of tyre maker Dunlop India Ltd and engineering firm Jessop and Co. Ltd from the Ruia Group.
The decision to cut losses marks a reversal in Banerjee’s policies, but it isn’t the first attempt in West Bengal to restructure sick state-owned enterprises.
Back in December 2003, the state government had launched a drive to restructure several loss-making companies with the financial support of the UK’s Department for International Development, a multilateral funding agency.
Under that initiative, state-owned enterprises such as the iconic Great Eastern Hotel in Kolkata was sold to the Lalit Group and at least 21 companies wound up, but the programme was halted in 2009 for fear that it could lead to more job losses amid an economic downturn.
After coming to power for a second term last year, Banerjee had announced that the state would liquidate its equity interest in joint venture housing companies. The state remains invested in several such companies though the model of joint sector housing development has been abandoned by Banerjee.
It was, however, soon found that these companies had hardly any ongoing projects and that they were worth little or nothing, so the state gave up on the plan to cash out of these ventures.
Most of the JVs from which the state is now looking to exit are loss-making, said the officials cited above. “It’s a mixed bag of loss-making enterprises and non-starters, but there are among them some profit-making ones as well,” one of the officials said, but declined to name the JVs.
Haldia Petrochemicals Ltd (HPL) in which the state continues to own a minority stake is not on the list, according to these officials. The sale of the state’s rump holding in HPL is governed by a different share-purchase agreement with The Chatterjee Group, the controlling shareholder in the company, they added.
A section of state government officials raised questions about the transfer of the government’s minority stake in Metro Dairy, citing that Keventer Agro was the sole bidder and that its bid was only a few lakh rupees higher than the announced reserve price of Rs84.38 crore.
It is unusual to state the reserve price in the information memorandum because it impairs price discovery through auction, said a senior transaction adviser and former adviser to the state government, who asked not to be identified. It is not surprising, however, that Keventer Agro was the lone bidder because it is already in control with a 53% stake, this person added.
The state said in the information memorandum that it decided to sell its stake in Metro Dairy because the firm needs to make “significant investments” to augment capacity and regain its lost market share.
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