New Delhi: Mines Ministry has told Finance Ministry that selling government's stake in Vedanta-controlled Hindustan Zinc (HZL) is not a "wise move" as it is the only firm in India controlling production of the metal, considered strategic due to its large scale industrial utility.
In 2002-03, the government sold its 64.92 percent stake in HZL to NRI billionaire Anil Agarwal-led Vednata Resources, while retaining 29.54 percent. In 2012, Agarwal offered about USD 2.57 billion to buy the government's remaining stake.
In a letter to the Finance Ministry, last month, Mines Ministry said that any plans to offload government's stake in HZL would not be "a wise move as zinc is a strategic mineral", a government official in know of the development said.
The letter explained that HZL is the only player in India producing zinc and controlling its known reserves located in Bhilwara, Udaipur and Rajsamand districts in Rajasthan.
"Considering the situation that HZL controls almost all the known reserves of the metal and is the only big player in India, it is not advisable for the government to sell its stake in the firm keeping in mind the industrial importance that zinc holds," the Mines Ministry said.
Considered the fourth most widely used metal after Iron, Aluminium and Copper, Zinc is most commonly used as an anti corrosion agent for galvanisation -- a process of coating it on iron and steel for protection against corrosion.
It is also used for making LPG regulators, automobile components, dry cell batteries and paints. Another important use of zinc is in making alloys such as brass, nickel silver, typewriter metal, bronze, German silver and aluminum solder.
Besides HZL, the Braj Binani Group is the other player that through its firm Edayar Zinc Ltd produces around 14,000 tonnes per annum of the metal.
Even the Supreme Court, last week, had questioned the government move towards showing "hurry" in selling its shares in HZL which deals with "strategic minerals".
The apex court also restrained the government from going ahead with any further disinvestment of its stake in the firm.
The move is considered as a setback to government's plans for meeting its disinvestment target of Rs 69,500 crore for 2015-16, against which it has so far garnered Rs 12,700 crore.
Confirming the development, another official said the government gets a "healthy" dividend from HZL - which in the coming years is expected to increase further, considering the "strong indications" that industrial activity in India will pick up thereby increasing the consumption of Zinc.
In its 2014-15 annual report, HZL said the total outgo on dividend, including tax on dividend, will be Rs 2,207 crore during FY15 from Rs 1,730 crore in 2013-14.
Vedanta Ltd holds 64.92 percent stake and the government controls 29.54 percent, with rest of the shareholders having less than 1 percent stake in the company.
HZL was incorporated in January 1966 as a Public Sector Undertaking (PSU) after the takeover of the erstwhile Metal Corporation of India Ltd.