The United Progressive Alliance has cancelled the further divestment in the government's stake in the public sector unit Bharat Aluminium Company (Balco), dealing yet another blow to the divestment process.

In a decision taken on Thursday, the UPA overturned the previous National Democratic Alliance government's decision and decided to return the cheque for Rs 1,098 crore (Rs 10.98 billion) sent by Sterlite Industries for the acquisition of the remaining 49 per cent stake in Balco.

The Government of India had in February 2001 divested 51 per cent stake in Balco to Sterlite Industries in a deal that fetched the government a total of Rs 800 crore (Rs 8 billion), even as it retained 49 per cent holding in the company.

The government had prior to that reduced its holding to 50 per cent, but the employees went to the Delhi high court challenging the decision.

However, the court dismissed the employees' petition and allowed the government to offload its holding.

The final agreement was signed on February 26, 2001 when Sterlite handed over a cheque of Rs 551.50 crore (Rs 5.515 billion) to the Union government. The company had already made a payment of over Rs 240 crore (Rs 2.40 billion) to the government earlier and also paid tax on it to the tune of Rs 30 crore (Rs 300 million).

The decision to refund Rs 1,098 crore to Sterlite will lead to a legal tussle between the government and Sterlite. According to the shareholders agreement, Sterlite can buy the remaining 49% stake at a price to be decided on the basis of the valuation of Balco shares.

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