Govt plan to revive PSEs flounders

Only a few companies out of the large number of sick Public Sector Enterprises (PSEs) recommended for revival have been able to turn themselves around and the government is trying to understand why the results are disappointing.

Revival packages for 26 sick PSEs were drafted by the Board for Reconstruction of Public Sector Enterprises (BRPSE) in 2005. But two years later, in the last financial year (2006-07), only nine PSEs managed to revive themselves. Some of these have succeeded in reducing their losses, while others have actually posted a profit. The rest are just stories of broken promises.

When the BRPSE embarked upon the reconstruction of these companies, it was the managements which set their own targets. This, it was felt, would put less pressure on the company concerned which could turn itself around at its own pace, addressing the specificity of its problems.

Five PSEs under the Ministry of Chemicals and Fertilizers were granted revival packages. Two managed to make profits, but three continued to be in the red in 2006-07.

The loans of two companies under the administrative control of the Ministry of Textiles were waived, but both of them failed to show better results "" National Textiles Corporation (NTC) and its subsidiaries showed losses amounting to Rs 621.34 crore in 2006-07, while British India Corporation Limited recorded losses of Rs 12.75 crore.

P K Basu, chairman of the board, explained that this had happened because of a "delay of over two years in finding a joint venture partner".

The Ministry for Heavy Industries has the biggest chunk of sick PSEs needing revival. Of the 13 ailing PSEs under this ministry, only two could make profits. The other 11 couldn't even deliver the results they had targeted themselves. Worse, six PSEs incurred losses as against profits projected by them.

Hindustan Machine Tools (HMT), for instance, which was expected to make a net profit of Rs 5.77 crore, has dipped deeper into the red, accumulating losses amounting to Rs 51.72 crore.

According to Basu, "approval to the revival packages was badly delayed. These companies didn't get enough time to achieve targets. The managerial leadership could have been better in some cases."

Heavy Industries Minister Santosh Mohan Dev agreed with the diagnosis, but said, "Some cases had been referred to the Board for Industrial and Financial Reconstruction (BIFR), which is a quasi-judicial authority. The government has no control over BIFR process, so there are delays."

"During the NDA regime, many cases were referred for closure. I have reversed those decisions," He added.

It is not that there is no hope for sick PSEs. One PSE each under the Ministries of Coal, Mines and Science and Technology has posted net profits in 2006-07.

The shining beacon, however, is Eastern Coalfields, which out-performed its own projections in 2006-07. The Mineral Exploration Corporation came within kissing distance of achieving its target of net profit.

The mixed record of revival of sick PSEs spurred Basu to write to the prime minister in July,asking for his intervention to bring to fruition an important commitment in the Common Minimum Programme: "To modernise and restructure sick public sector companies and revive sick industry".

Basu told Business Standard: "All these companies have potential. If we support them properly, they will surely put up a fantastic performance."

Recommendations for the revival of 45 companies have been sent to the ministries concerned to date. Of these, the Union Cabinet has approved 27 packages. While 26 companies got a chance to revive themselves, one was asked to close down after due compensation was paid to its workers.