State-Owned MMTC Keen On Buying Stake In Russian Diamond Miner.

NEW DELHI: The government has given green signal to state-run companies to pick up stake in Russian diamond major Alrosa, subject to it scrutinizing the company.

Alrosa plans to divest 20% of its equity in the current year in a deal expected to cross $2 billion. New Delhi is keen on an Indian entity picking up interest in Alrosa in order to ensure a stable supply of rough diamonds for its over Rs 60,000-crore industry that employs more than five lakh people, a government official said.

State-owned MMTC is keen to pick up stake in Alrosa. The government is also exploring asking two or more state-run companies to put in a joint bid, but wants to tread cautiously. "The government wants a thorough examination of the company before any Indian entity puts in a bid," said a government official.

The decision for a scrutiny of Alrosa, which has a 25% share in world's rough diamonds production, was taken at a meeting of officials from ministries of commerce, finance and mines. Commerce ministry is likely to seek details of the company, its mines and balance sheet from the Russian government, said an official privy to the deliberations. India has 95% share in the world's cut and polished diamond exports. Its total exports in 2010-11 stood at $28.25 billion.

A secure supply of rough diamonds can give a leg up to the local diamond processing industry and boost employment. Moreover, New Delhi also wants to preempt any move by other countries, such as China and US, to buy stake in world's largest diamond miner as it could have long-term supply and pricing implications for its diamond hub. Commerce minister AnandSharma has already had preliminary discussions with his Russian counterpart.

He had sought Russian government's support for participation of Indian companies in Alrosa stake sale during his meeting with Russian minister of economic development Elvira Nabiullina in June this year.

Sale of stake in Alrosa is part of Russian government's privatization plans, which envisages sale of stakes in 10 major state-owned banks and companies worth 1 trillion roubles or $33 billion over the next three years. These include Rosneft, RusHydro, shipping company Sovcomflot, Sberbank, VTB bank and the United Grain Company.

The Russian federal government holds 50.92% in Alrosa, republic of Sakha (a state in Russia) has 32%, administrations of eight municipal districts in Sakha have 8% share and the balance 9% is held by other legal entities and individuals.

Source :economictimes.indiatimes.com