Augustine Correa

Business World magazine has a sensational scoop based on the internal minutes of a Committee of Secretaries on Disinvestment showing how rules were changed for the controversial privatisation of IDBI Bank which was sold to Canada based Fairfax Financial Holdings at Rs 52,878 crore ($5.55 billion) at Rs 81 per share. The internal minutes state that the initial sealed bids from Fairfax and another entity came well below the confidentially set minimum reserve price of Rs 94.42. The Fairfax bids came at Rs 75. So what do the babus do? They pull off something unprecedented but do it openly and transparently. They move to another valuation method and ask Fairfax and another bidder (strangely not named because it was later rejected by Home Ministry for security reasons!) to give new bids. This time Fairfax bids Rs 81 per share , still well below the original reserve price of Rs. 94.42. Then Fairfax says this is the final offer and it would withdraw if not accepted. The government accepts it and also gives some relief on disputed tax claims on IDBI Bank. Tax payer also makes a hefty contribution here! The deal goes through at Rs 81 per share(the original reserve price was Rs 94.42) and the internal note strangely gives reasons why this sale was necessary for the government at this juncture- Fiscal stress on Centre due to high energy prices, lack of FDI inflows and the currency under strain because of the global energy crises! As per Business World report the justification for change of rules and methodology for the sale of IDBI Bank came from the General Financial Rules for sale of government physical assets but not shares. Then it cites the Railway Stores Code on auctioning scrap: "Bids lower than the reserve prices may, however, be accepted by the Depot Officer where found expedient provided the Depot Officer doing so records his reasons in writing." In my 40 years of journalism I have not come across such justification for privatisation. Business World's Palak Shah must be commended for this investigation.