India: privateers loot public money

Videsh Sanchar Nigam Ltd (VSNL) is a classic example of how 
privatisation can be used to siphon off public money. It is nothing short 
of blatant, outright fraud.

The profitable, publicly owned VSNL was taken over by Tata, for the sum of 
Rs. 2591 crores [25.91 billion rupees, approximately A$6.5 billion — 1 
crore is 10 million]. The government still holds 26 per cent of the shares 
of VSNL.

Tata management decided to siphon off Rs. 1200 crores of VSNL funds to one 
of its own companies, Tata Teleservices.

At the time of this disinvestment, VSNL had a cash reserve of Rs. 1600 
crores plus profits of Rs. 1407 crores in the last financial year — i.e., 
a total cash reserve of more than Rs. 3000 crores.

"Not only have the Tatas paid less than the cash reserves of VSNL, even the 
Rs. 2,591 crores that they spent in acquiring VSNL, was loaned by public 
financial institutions and banks", the Polit Bureau of the Communist Party 
of India (Marxist) pointed out in a statement issued on June 1.

This "illustrates the fraud that is going on in the name of disinvestment 
of profitable public sector units [PSUs]", the Polit bureau said.

Tata management decided to transfer the Rs. 1200 crores to Tata 
Teleservices to acquire 26 per cent of its shares. By any acceptable 
commercial method, the net worth of Tata Teleservices is far less than what 
VSNL will pay for acquiring 26 per cent of its shares.

"This is not only a fraud on the current shareholders of the VSNL, but also 
on the people, as the government still holds a 26 per cent stake in the 
VSNL", the CPI (M) statement said.

"The Minister for Communications in criticising the Tatas is hiding the 
government's role in disinvesting the cash-rich company and the role its 
director played in the Board of the VSNL.

"While the patently illegal act of the Tata management has to be blocked, 
the key issue is the process of disinvestment that allowed VSNL to fall 
into the hands of a private company for less than even its cash reserve of 
Rs. 3000 crores.

"While the VSNL case has become public, the pattern in other cash-rich 
companies such as IPCL is no different. It is a classic case of crony 
capitalism. To stop this private loot of public money, the disinvestment in 
such cash-rich PSUs needs to be halted immediately", the statement 
concluded.