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23 March 2011

Was VSNL BJP's 2G?

Response to Purnima S Tripathi's article
[click on the headline for the Frontline feature]

From an editor's perspective, I see some loopholes in the writer's argument. First, it's a leftist viewpoint, which dictates that profit-making PSUs should not be divested. As per the point of view of an advocate of liberal market, however, government has no business being in the telecom trade; it must confine itself to social sectors. It further dictates that governments cannot sustain the vibrancy of a company in the long run, no matter how sound the fundamentals of the company are at the time of disinvestment.

Second, when the writer says, "Industry experts... pointed out that the company was doing well... ," one wonders who these "experts" are, as none is quoted to that effect in the article. Prabir Purkayastha, whose views are explained in the next paragraph, appears to be the only person on whose views the article is based. And he cannot be an expert, as he contradicts himself by saying on the one hand that "government should not be in the telecom business" and opining that "the NDA government... compromised the national interest" and also "showed scant business sense" on the other. The next quote is from Dipankar Mukherji, a leftist trade unionist.

To be fair to Purkayastha, it may be questioned whether he was actually interviewed by Tripathi or she merely copied contents from this 12 January 2009 article, and hashed it in such a manner that two separate statements by the 'expert' did not add up. Notably, unlike the lines of Mukherji, those of Purkayastha are not mentioned in quotes; hence the suspicion.

Third and this is a personal view it's difficult to believe Arun Shourie is corrupt or even corruptible. His personal life shows no evidence of his raking in the moolah from shady deals. And, as a professional, he has maintained across all the disinvestments he has presided over from Centaur Hotel to VSNL that he could only sell to such companies that appeared for the bids.

Fourth, if the Tatas had been a beneficiary of the NDA regime, Ratan Tata must be quite an oaf to have damned that dispensation recently for not letting his domestic airlines take off.

Fifth, with the Communications Ministry now under his belt, the part of the investigation ordered by Kapil Sibal which deals with the de-merger of surplus VSNL land in Dighi (Pune), Halishahar (Kolkata), Chhattarpur (Delhi), Greater Kailah (New Delhi) and Padianallur (Chennai), measuring 773.13 acres, does not make eminent sense. Just a stern message from the minister to his office should see its functionaries rush to him with all relevant files and explanations. The other part, probing into the NDA's manner of divesting the PSU in 2002, does hold water.

Let's begin with philosophy. The very premise on which disinvestments are based is questionable. If the free market principle calls for competition, it defies reason why the government should facilitate the private sector waiting to devour PSUs to kill the contest, and why, instead of building a company from scratch, it should get a readymade one served on a platter. Howsoever high the price the private player is made to pay for the deal, it can never match the long-term gains it snatches away from the exchequer.

VSNL Managing Director SK Gupta, Union Communications Minister Pramod Mahajan and Tata Group chairman Ratan Tata at a function held on 13 February 2002 to sign the shareholders' agreement for VSNL in Mumbai [Photo courtesy: Frontline]
Furthermore, while Shourie might be a man of high scruples, not even the staunchest BJP supporter would vouch for the bona fides of Pramod Mahajan, the then communications minister. I suspect he created such procedural hassles at his end in the Communications Ministry that Shourie, waiting in his office of the Divestment Ministry, was left with little choice but to keep postponing the intimation to the prospective bidders about the withdrawal of the contingent liability of Rs.1,402.80 crore on VSNL till only a day before the bid was opened. Within a day, the industry couldn't have thrown up better offers, and so the Tatas got away by paying a price just marginally higher (Rs 1,439 crore) than the contingent liability cost. Telecom beat journalists would speculate in 2002 that Mahajan was unhappy with Shourie who appeared to be 'favouring' the Tatas. No prizes for guessing whom Mahajan favoured; he might not have calculated that the delay caused by his ministry wouldn't benefit the company that he has often been accused of being a stooge of.

On his part, Shourie was lazy, if not dishonest, and his officers were incompetent. Nothing else explains the valuation of a total of more than 700 acres of prime land at Rs 151 crore when just the plot of Greater Kailash would cost nothing less than Rs 2 crore an acre in 2002 and Rs 16 crore per acre as of now! One of those bureaucrats eventually emerged as a dodgy character in l'affaire Niira Radia: Pradip Baijal, the then chairman of the Telecom Regulatory Authority of India.

And why is Shourie lazy, if nothing else? Because he made no effort to detach the surplus land before VSNL went to the Tatas. And now Ratan Tata's company has reason to create roadblocks in dissociating the land from itself as the group chairman indicated in his letter to Shourie, dated 27 February 2004: "... there is a specific proviso in these agreements that permits (the) Tatas to consider delivering value to the Government as also to the exiting shareholders at the time of disinvestment by virtue of paying an amount equivalent to 45% of the value of the land as determined by an appraiser defined in the Shareholder's Agreement." Is it too simplistic to conclude, therefore, that the Tatas are waiting for the de-merger to come unstuck so that the prime plots go to it at 45% of their real value?
Yesterday, Shourie defended his decision only to the extent of addressing the 'land grab' issue in response to the current Communication Minister Kapil Sibal's ordering a probe into the delay in de-merger of surplus land from VSNL (now Tata Communications). The former minister, cooling his heels at the margins of his party, the BJP, says, "There are such stringent clauses that the person who wins the bid on VSNL, we have provided, shall not have any right on the land at all." He has yet to clarify his stand on the charge that, overall, the deal was a sell-out.
As Shourie and Sibal spar over the 2002 deal, daring each other through media sound-bytes, the next move of the leftists will be interesting to note. Will they take a cue from the Frontline article to put the BJP in a spot, or will they find it politically unwise to spend a part of their anti-Congress energy in panning the right-of-centre party when it is Sonia Gandhi's party that they must take head-on in this season of Assembly elections in West Bengal and Kerala?

Finally, if selling a PSU away at a throwaway price is a done thing, what wrong has A Raja done? As in the case of the 2G scam, where initial bidders sold the spectrum to their clients at a much higher rate, here too a prospective loss to the people can be calculated on the basis of the money the Tatas made by diverting funds from VSNL to Tata Teleservices.

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Surajit Dasgupta treats no individual, organisation or institution as a holy cow.