Friday, August 25 2006 17:40 Hrs (IST) - World Time -

New Delhi: The Comptroller and Auditor General today (Aug 25, 2006) criticised the previous NDA Government for undervaluation of a number of PSUs, including Balco and VSNL, where equity was disinvested.

"Audit examination reveals instances of far too conservative assumptions made by the global advisors in 7 out of 9 PSUs. The assumptions had the potential of adversely impacting the business valuation, based on which the reserve price was fixed for disinvestment," CAG said in a report on disinvestment during 1999-2003.

"Audit noticed a general trend in the disinvestment of PSUs that majority of bidders, who had initially submitted Expression of Interest, withdrew during the process during due diligence limiting the competition," the report tabled in Parliament said.

It said as many as 48 out of the 70 parties interested in becoming strategic partners had withdrawn and only in two cases (IBP and IPCL) more than two financial bids were received indicating that the competitive tension generated in the process was not encouraging enough to have maximised the value of stake under disinvestment.

The CAG attributed the lack of adequate interest among the prospective investors to the failure of global advisors, who were unable to generate adequate competition at the bidding stage.

"The government also continued to this situation by delaying crucial decisions, affecting the financial health of the PSUs," it said.

The report also said that the exercise of asset valuation did not appear to have been undertaken with due seriousness in as much as the valuers were generally not given enough time and core and non-core assets had not been segregated before valuation.