In the 1990s, the Indian economy underwent a sea change. The country's economy was exposed to global competition on the back of a slew of economic reforms. In 1995, the country joined the World Trade Organization. All these events started signalling an end of the monopoly of public-sector units. Against the backdrop of falling tariffs, Steel Authority of India started making losses in 1999. To stay relevant in a new competitive world, government companies needed a dose of capital investment and technology upgradation. However, the government could not sustain a negative return of Rs 15,000 crore (1998-99) on an equity investment of Rs 80,000 crore in public-sector units. Divesting the controlling stake was the need of the hour.
Bharat Aluminium Co (Balco), a vertically integrated player with captive bauxite mines and refining and smelting of aluminium, was the first miner to be put on the block. In February 2001, the government sold its 51 per cent stake in the company to Sterlite Industries for Rs 551.5 crore. However, the deal soon ran into trouble. Opposition parties were against the divestment initiative and started campaigning against it, criticising the government for selling public-sector companies to private ones. Supported by the Chhattisgarh government, workers at the Korba facility went on a 67-day strike. After a protracted battle, the Balco management and union reached an agreement and Balco's divestment happened.
Finally, a smooth sail
Following Balco's divestment, Hindustan Zinc's divestment happened. Given the several issues during Balco's divestment, the government took several measures during the divestment of Hindustan Zinc in order to avoid any problem. This time, the government took all stakeholders, including the opposition and unions, in confidence.
Back in the late 90s, Hindustan Zinc was the monopoly zinc and lead producer in the country with a market share of 55-60 per cent. Although the company was delivering profitable growth continuously, a falling tariff regime and cheap imports were becoming a threat to its margins. Since zinc and lead were considered non-strategic, the government sold its 26 per cent controlling stake in the company in March 2002 for a value of Rs 445 crore to Anil Agarwal-led Sterlite Industries, which emerged as the highest bidder, offering Rs 40.5 per share. Further, as a part of the call option given to the private player, the government further sold its 19 per cent stake for Rs 324 crore in November 2003.
From a total of 45 per cent stake sale, the government generated Rs 769 crore. However, Hindustan Zinc's real story lies in the near 30 per cent stake retained by the government. This stake today is valued at more than Rs 30,000 crore. Besides, it has cumulatively garnered dividends of more than Rs 15,000 crore during March 2002-19. Private ownership has brought improved efficiency and technology upgradation. From its open-cast operations, the company has managed to completely change itself into a much more capital-intensive underground mining company. Today, Hindustan Zinc is the world's second-largest zinc-lead miner and one of the top 10 silver producers.