PSU bidding norms weak and porous, says House panel

NEW DELHI: A standing committee on finance has severely criticised the disinvestment ministry for its guidelines on disqualification of bidders.
In its report submitted in April this year — which has now resurfaced given the anti-disinvestment stance of several members of the ruling alliance — the committee has stated that the guidelines are weak, inadequate and porous.
It said that the standards are not sufficient and do not cover the offences committed under the Official Secrets Act and cases pertaining to wilful default of money. “The committee is of the opinion that these offences are in no way less serious than those included in the guidelines.�
The committee has further said that “it strongly recommended drawing of comprehensive guidelines for qualification or disqualification of the PSU bidders�. Also, the scope of the guidelines may be broadened to include business activities of unhealthy, unethical and unscrupulous nature, the committee, chaired by N Janardhana Reddy, has stated.
The divestment ministry had in July ’01 issued a circular on disqualification of bidders to debar those convicted or chargesheeted for endangering national security and those who have been either indicted by Sebi or the RBI. The report also comes down heavily on the government’s asset valuation guidelines.
Describing the asset valuation guidelines as inadequate and vague, particularly on the issue of land valuation of disinvested PSU, the committee has said that land is a tangible asset which has value irrespective of whether it fetches income at a particular time. The land should be valued separately and should be factored into the computation of the total value of assets of the company which is disinvested.
The committee noted that the value of the land of a company being disinvested is computed as part of the assets. But the actual value is not considered in most cases. It has recommended that the norms for evaluation of public sector units’ assets should be modified to take the value of the land into consideration.
The disinvestment ministry held that though huge tracts of land may be available to a company, it may be encumbered or may not be generating any income. In such cases, the government cannot demand value for the land transferred to the strategic partner.