Karnataka to float SPVs to revive NGEF

The Karnataka government on Thursday submitted a proposal to the single judge bench of the high court on reviving the the loss-making PSU, the New Government Electric Factory (NGEF).

The government has proposed to float two special purpose vehicles (SPV) "" Motors and Transformers SPV and NGEF Real Estate SPV. The NGEF Real Estate, by auctioning its land, can fund the revival of Motors and transformers SPV. However, the revival package is subject to the approval of NGEF creditors and share holders.

The single judge court had set April 6 as the deadline for the government to submit the revival package. The single judge court, after receiving the revival package, directed the parties concerned to file their objections.

The revival package was prepared on the basis of the recommendations of an expert committee constituted by the government. The committee, in its report had observed that NGEF owns 143 acres of land in various parts of the city, including the unit on NH 4 (Bangalore-Chennai). The market value of the property is estimated to be around Rs 2,288 crore. The sale of machinery and other assets can fetch another Rs 100 crore. A new unit of NGEF can be started anywhere 30 km from Bangalore through a JV with an investment of Rs 300 crore. The government will sit on a cash pile (Rs 1,800 crore) which can be invested to improve the city infrastructure, according to the report.

At present, 120 workers of the NGEF have refused to accept the VRS offered by the company. The expert committee has suggested that NGEF could retain 45 of them as they are skilled and young.

Of the five units maintained by the NGEF, only two units manufacturing transformers and electric motors can fetch profits in the prevailing scenario, the panel observed.

The NGEF's closure was ordered in 2002 by the Department of Disinvestment and Reforms in PSUs. As part of the liquidation, the government had invited bids for sale of NGEF land after it failed to privatize the company.

Puravankara Projects and Sobha Developers, two of Bangalore's biggest real estate developers, through a 50:50 joint venture, called Melmont Constructions, bid an amount of Rs 1,327 crore for the entire property. The bid price was well above the reserve price of Rs 737 crore and translated to Rs 9.28 crore per acre.

According to sources, the Prestige group in association with the Mukesh Ambani group, bid for the land and the amount in this case was understood to be around Rs 1,600 crore. The DLF group had been another bidder at a price of Rs 1,132 crore.

However, when the erstwhile Congress-JD(S) government came to power, it announced the revival of the NGEF. The single judge court presiding over the liquidation of NGEF terminated the auction proceedings of NGEF assets and gave time to the government to submit a comprehensive revival package.