Sale of CEL: Employees Union files complaint with CCI; demands probe in deal to sell the PSU
Modi govt allegedly reduced the price of the CEL to benefit furniture making company Nandal Finance having less than 10 employees
Weeks after Modi government put issuance of Letter of Intent (LOI) to Nandal Finance and Leasing on hold, employees of the public sector company CEL have filed a complaint with the Competition Commission of India (CCI), demanding probe into the “sale of PSU”.
Central Electronics Limited (CEL) is a public sector company of strategic importance, involved in developing electronic parts for Indian Space Research Organisation (ISRO) and DRDO. Nandal Finance and Leasing has won the bid to buy government's stake in the CEL.
A leader of the employee union CITU (Centre of Indian Trade Unions) said that the Union has lodged a complaint with the CCI on February 16, alleging that the Modi government has deliberately undervalued the public sector company which was valued at Rs 957 crore with a market-order worth Rs 1500 cores.
In the complaint, the employees' union has also alleged violation of competition norms with the CCI.
The Competition Commission of India (CCI) is a statutory body within the Ministry of Corporate Affairs and is responsible for enforcing the Competition Act, 2002 in order to promote competition and prevent activities that have an appreciable adverse effect on competition in India.
The CCI looks into cases and investigates if the same has a negative impact on competition.
It is worth recalling here that the Modi government had fixed the reserve price for CEL at Rs 194 crore while Nandal quoted Rs 210 crore.
Despite allegations of “corruption in the form of undervaluation”, the Modi government has defended the valuation.
NH has learnt that an inter-ministerial group on disinvestment which was asked to examine the valuation, has also given a report in favor of the government, concluding that “no lapse has been found in the process”.
Tuhin Kanta Pandey, secretary at the Department of Investment and Public Asset Management (DIPAM), said in January, “The government got Rs 210 crore which is almost twice of the book value because the balance sheet value of CEL’s equity is Rs 111 crore. The land worth Rs 400 crore with CEL, is not freehold land. It is a leasehold land, and out of 90 years lease, 46 years have already gone.”
On net asset value, Pandey asserted that it is just Rs 72 crore. He said that the higher value of Rs 194 was fixed, instead of Rs 172 crore of balance sheet value, and the government ended up getting Rs 210 crore.
On the allegation that the winning bidder had no experience in any of the areas of expertise of CEL, Bhagwat Kishanrao Karad, minister of state, Finance Ministry, said in the Rajya Sabha on February 8 : “For strategic disinvestment of CEL, open bids were invited based on the criteria of net worth as laid down in Preliminary Information Memorandum (PIM)/Expression of Interest (EoI).
The field of work of the bidder is not among the relevant criteria. It is a part of the disinvestment policy of the Government to not make sectoral experience a qualification criterion for bidders to expand the universe of bidders and provide them a level playing field.”
In November last year, Cabinet Committee on Economic Affairs (CCEA) comprising Nitin Gadkari, Nirmala Sitharaman, and Jitendra Singh approved the highest price bid of Nandal Finance for sale of 100% equity shareholding of central government in CEL.
NH was first to report how bid-clauses were diluted to privatise the PSU of strategic importance.
First attempt to sell the PSU which produces radomes for missiles, piezo-electric generator fuse for Heat-55 for ordnance factories along with bullet proof jackets for the army, was made in 2018 but no bidder had come forward then.
Sanjay of CITU claimed after the service-clauses were diluted significantly. Then a request for Expressions of Interest (EOI) was invited in February 2020, following which three preliminary bids were received.
Apart from Nandal Finance and Leasing Pvt Ltd, JPM Industries Ltd put in financial bids by October 12, 2021. While Nandal Finance and Leasing Pvt Ltd bid for Rs 210 crore, JPM Industries Ltd bid stood at Rs 190 crore.
The bid by Nandal Finance was higher than the “reserve price” of Rs 194 crore set by the government based on the valuations.
Congress spokesperson Gourav Vallabh had also raised the issue and alleged that “the Modi government in a bid to cover-up their incompetence to manage the country’s finance and economy has been crippled with short-sightedness and hellbent on killing all the golden goose.”
In a press conference which he addressed in January this year, the Congress leader had pointed out that the reserve price for sale of CEL was set at Rs 194 crore although it was valued at Rs 957 crore .