Financial institutions (FIs) and banks, led by the Industrial Development Bank of India (IDBI), have taken an in-principle decision to accept the proposal for a one-time settlement of dues by the eight subsidiaries of the ailing National Textile Corporation (NTC). These subsidiaries own around 100 mills spread all over the country.
The FIs decided at a recent meeting that their dues would be repaid through the issuance of tax-free bonds guaranteed by the Union government. The bonds are proposed to be issued by NTC (Holding) Co, with a maturity period of five years and an annual interest coupon of 9.5 per cent. Further, these bonds would be listed and freely tradable.
Disclosing this, highly placed financial institution sources said, "The total outstanding dues on the date on which the accounts were classified as non-performing assets would be the settlement amount under the one-time settlement of dues scheme."
The bonds would be finally redeemed by the sale of surplus land owned by the ailing mills.
NTC has, after an exhaustive study, identified that 43 mills be closed down, 16 mills are to be revived. NTC decided to conduct a study about the prospects of 47 other mills. All these mills are owned by the eight subsidiaries of the NTC (Holding) Co.
The Union government and NTC have mooted that financial institutions, particularly IDBI, form a special purpose vehicle (SPV) that would raise funds. These funds could, in turn, be used by the proposed holding company for voluntary separation and retirement schemes, and retrenchment compensation for those mills that have to be closed down.
In the case of the 16 mills that can be revived, the proceeds of the sale from surplus land can be utilised for modernisation and downsizing.
The total value of the land owned by the 100 odd mills is estimated at about Rs 2,900 crore. These mills are spread over Mumbai, Bangalore, Delhi, Kolkata, Hyderabad, Kanpur, Lucknow, Indore and Ahmedabad.
Critical to the sale of the land is getting permission from the respective state governments. Gujarat, Delhi, Punjab and Rajasthan have already given unconditional permission.
The Maharashtra government has given permission subject to the condition that the realisations from the sale of the land should be used only for reviving mills in the state.
The state governments of Orissa, Bihar and Kerala are still considering the proposal while Madhya Pradesh has refused to give permission and the Andhra Pradesh government has not responded so far.
Institutions fear that there are further problems such as reduction and waiver of stamp duty on the sale of land, the SPV may find the going tough and there is every prospect that it might get entagled in litigation.
