The industry ministry has decided to offload up to 74 per cent of the government stake in 11 public sector undertakings (PSUs) as a last-ditch effort to turn around these sick units.
The ministry has also proposed a Rs 200-crore revolving fund, consisting of 10 per cent of the disinvestment proceeds, for quick implementation of turnaround plans. The corpus has been mooted as even after the revival package is sanctioned, procedural delays in releasing funds bog down the project, leading to further losses.
In a note to the cabinet, the ministry stated that while joint venture partners would be offered up to 74 per cent equity, the rest would be retained by the government as a measure to re-assure employees that their interests would be protected and to exercise control on special resolutions.
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According to the proposal, awaiting cabinet approval, Scooters India Ltd, Hindustan Cables Ltd, Tungabhadra Steel Products Ltd, Hindustan Paper Corporation Ltd, Bridge and Roof Company, Bharat Leather Corporation, Bharat Pumps & Compressors Ltd, Bharat Heavy Plates & Compressors Ltd, National Industrial Development Corporation, Hindustan Salts Ltd and Praga Tools have been identified for divestment. All of these come under the department of heavy industry.
The note said that leading merchant bankers and consultants would be engaged to identify joint venture partners. The final proposals for joint ventures for each of the PSUs will be placed before the cabinet for approval.
According to the note, these public sector units face greater competition in the liberalised policy regime which has affected their long-term viability.
Some of the units face acute liquidity/marketing constraints and inability to mobilise resources, threatening their survival. Having suitable tie-ups, including joint venture formation, would be the appropriate strategy for long-term viability of such units, the note adds.
The note stated that the traditional foreign tie-up route to purchase technology is expensive and often a one-time and temporary measure. Therefore, it is not cost-effective in an era of rapid technology changes and product cycles.
While the PSUs provide readily available manufacturing facilities, trained and skilled manpower and professional management, the joint venture partner provide technology, modern management techniques and marketing strength. However, private partners set majority equity participation as a pre-condition. That is why the ministry had decided to offload equity up to 74 per cent.
The government has already approved formation of joint ventures, including majority private equity holding, in Mandya National Paper Mills, HMT Ltd (all business groups), Hindustan Photo Films, Nepa Ltd, Cement Corporation of India (all 11 units), Andrew Yule, Instrumentation Ltd, Kota and Engineering Projects Ltd.
In certain PSUs, financial restructuring is already being carried out with measures to waive interest or fund and reschedule or recategorise the principal amount on government loans to these companies. The move does not entail cash outgo from the government while such a financial restructuring would enable these companies to access institutional finance and bank credit and enhance their appeal to prospective joint venture partners, the note said.
Left parties oppose move
Our Political Bureau
The Left parties yesterday criticised the governments proposal to sell up to 74 per cent of its stake in 11 sick public sector units and said that mere privatisation may not lead to their revival.
While the Communist Party of India (CPI) was more guarded in its criticism, the Communist Party of India (Marxist) said that in principle, the party was opposed to the move as it was not intended to strengthen these units, but to bridge the fiscal deficit in the budget.
CPI deputy general secretary N Giri Prasad said that privatisation could be tried as a way out if the idea was to make these units viable. We are opposed to it if it is intended just to privatise them. At the same time, the government must hold talks with the trade unions of these units before arriving at any conclusion, he said.