The central government’s disinvestment arm is pushing for a demerger of NMDC’s steel venture in Chhattisgarh and a strategic stake sale of the unit despite objections from the steel ministry, people in the know of the development said.
The Department of Investment and Public Asset Management (Dipam) has issued a revised note before it seeks the approval of the Cabinet Committee on Economic Affair for the demerger of the Nagarnar Steel Plant (NSP), following which the government’s shareholding (of 72.28% in the demerged entity) can be sold, they said. The process, the department expects, can be completed in seven months.
Dipam has argued that the demerger would give investors a clear idea of NSP’s individual operations and cash flows, the people, who have seen the note, told ET. The demerger will also likely increase the market capitalisation of NMDC since its focus would then be on the core business of mining, they cited the department as saying in the note. However, NMDC, its parent steel ministry and the Congress government in the state are opposed to the idea of disinvestment at this juncture.
Dipam’s note has cited the steel ministry’s objections. The ministry fears that the move will derail its plans to complete the construction of this 3-million-tonne-a-year plant deep in the Naxal-affected district of Bastar in Chhattisgarh, the people said. Conceived more than a decade back, the plant is expected to be commissioned by June 2020. It is now expected to cost Rs 22,500 crore. Also, the state miner believes any suggestion of disinvestment will affect its capital expenditure and complicate plans for acquiring new mines in the now Congress-ruled state, the people said.
Four years ago, when the Narendra Modi government initiated the disinvestment of this plant, there were strong protests. Even the then Raman Singh-led BJP government in the state had concerns that the move could flare up left-wing extremism. Current chief minister Bhupesh Baghel of the Congress has made public comments against any move to sell the plant.
The Congress, when it was opposition, had consistently opposed the idea of disinvestment and Baghel himself had led marches against it, said Alok Shukla, the convener of the Chhattisgarh Bacchao Andolan.
Dipam, however, is convinced that a demerger would not cast any shadow on the commissioning of the plant. And the Cabinet committee had anyway agreed to a disinvestment back in 2016.
While a direct disinvestment would have fetched NMDC the sale price and attracted capital tax (or dividend tax if it chose to distribute the gains), a demerger would allow for “a tax-neutral and more efficient” deal. Money will accrue directly to the central government, Dipam has said in the note, while pointing out that the project had been entirely funded by shareholder’s funds and had no debt component, the people said.
The NMDC chairman’s office did not respond to an email seeking comment. Senior NMDC officials, speaking on the condition of anonymity, said the move would have its unions, the state government and locals up in arms again. The company has already invested Rs 15,937 crore, as of August 31, 2019, in the plant and another Rs 7,203 crore is expected to be spent over the next 8-9 months.
Of the 1,980 acres the facility has, 884 acres come under scheduled land, or held by tribal people and acquired under the Provisions of the Panchayats (Extension to the Scheduled Areas). Transferability of this land to a private entity will be tricky affair.
But Dipam believes this could be taken care of while pursuing the actual disinvestment, and as long as the new owner takes care of past commitments.
