Finance Ministry claims no provision in law to sell NT shares for users

Kathmandu, February 11:

The Ministry of Finance (MoF) is likely to turn down a request of the Ministry of Information and Communication (MoIC) to allocate 20 units of shares to each customer of Nepal Telecom, citing lack of such a provision in the existing legislations.

MoF is sending a reply to MoIC on Tuesday, turning down the request as per the existing provisions of the Privatisation Act 2050, revealed a senior official with the ministry here today.

The MoIC sent a letter to MoF on February 1, requesting a review of the current selling model of government’s equity in NT, ensuring a minimum 20 units of shares to each telecom customer. The MoIC had also requested to bring down the current ceiling of 100 minimum applications for shares to 10 units and 1,000 from 5,000 in terms of maximum number of shares.

“The Privatisation Act 2050 doesn’t have any provision to allocate equity to customers, while selling the government’s property,” said Shiva Bahadur Rayamajhi, joint secretary,

who heads the privatisation unit at MoF.

He further claimed the MoIC had not defined the customer properly. “What kind of customers are eligible to get these shares_ customers having PSTN lines or GSM connections, CDMA or PCO owners or simply those who make calls through NT’s facilities?” he argued.

Rayamajhi further said the MoF’s reply to MoIC would include clarifications and legal complications of the latter’s request. “It will require the government to amend the existing Act to do so,” he added. Even if the government wants, it will not be possible to amend the Act at this time as it would have to go through the Parliament.

As far as the base price of Rs 600 is concerned, he said it was suggested by a team of experts and endorsed by the Cabinet. The base price was fixed after adding Rs 500 premium to the face value of Rs 100 each, after calculating the book value, profit earning trend and future potential of NT.

According to him, the book value of each share stood at Rs 212, when the decision was made to sell NT’s equity and additional premium was added by multiplying two and half times to the book value. As a part of divestment and privatisation plan, the government is selling its 10 per cent or 7.5 million unit shares of NT to public through an auction and five per cent to the NT’s employees. The sales have already begun from January 23 and will last till February 26 with the coordination of Citizen’s Investment Trust, as its sales manager. The government plans to raise at least Rs 9 billion by selling NT’s share.

However, the decision to sell the NT’s shares to public through auction by fixing a base price of Rs 600 for each share and sales of five per cent to NT’s employees at the subsidized rate of Rs 90 per unit, has drawn lot of criticism.

The decision to give five per cent share at subsidised rates to the employees was made as per the Privatisation Act, Rayamajhi said. The Act states that the government can give certain amount of equity either free or at a subsidised rate to the employees while privatising any the state-owned entity.

According to him, the MoF will also respond the parliamentary finance committee on progress of MoIC’s request on sale of NT shares within this week.