MPSIDC's last battle for survival

As a last option to save the ailing Madhya Pradesh Industrial Development Corporation (MPSIDC), a committee headed by a former justice of the high court of Madhya Pradesh will negotiate with various financial institutions to repay the corporation's debt, from November. If the committee is not successful, the MPSIDC may have to be closed.

The MPSIDC, an arm of the state industry department, had asked for an immediate bail-out package of Rs 350 crore from the finance department to repay debts (secured loans) of Rs 427 crore to the IDBI Mumbai District Central Cooperative Bank, and Bombay Mercantile Cooperative Bank.

MPSIDC officials borrowed the money and disbursed it among 22 industrialists as inter-corporate deposits for their short-term needs. The industrialists have now refused to repay even the principal. The cases are pending in the state's economic offence wing and no case has been filed so far on the scam.

The MPSIDC, according to senior officials, owes the IDBI Rs 135 crore, Mumbai District Central Cooperative Bank Rs 90 crore, Bombay Mercantile Cooperative Bank Rs 14.50 crore, and Rs 64.79 crore as bonds and other forms of debt. The corporation has also to repay interest of Rs 291.46 crore. Thus the corporation needs Rs 715.45 crore.

IDBI and Mumbai District Central Cooperative Bank have obtained orders of attaching properties of the corporation.

"The committee will negotiate with these financial institutions for a one-time settlement. The state government will release funds as the needs arise. If these financial institutions refuse to accept the the settlement, the SIDC may go to court. The SIDC has no option now since its borrowers have refused to pay even the principal amount," a well-placed source in the MPSIDC told BS.

The Shivraj Singh Chouhan government had approved a bailout package of Rs 210 crore to the MPSIDC a few months ago. Only a few of the borrowers or wilful defaulters came forward for a settlement with the MPSIDC.

Later they refused to repay even the interest rate of 1 per cent, against the prevailing interest rate of 18 per cent.