Closure of MPSIDC imminent

Finally the corporate outstandings have decided the fate of the Madhya Pradesh State Industrial Development (MPSIDC). The closure of the corporation seems imminent.

"Closure is a legal and always an open option," a top finance department official told Business Standard. If the corporation is closed, only the Madhya Pradesh Trade and Facilitation Corporation will be the nodal agency on behalf of the government on investment-related matters.

The corporation will be reduced to a cell to respond to pending legal matters.

The MPSIDC is under a critical financial strain since 1999 with corporate outstandings of Rs 96794.71 lakh, which it has to recover from 22 "wilful defaulters".

The corporation disbursed inter-corporate deposits (ICDs) to some corporate houses during 1997 and 2000 after obtaining secured loans from some bankers.

In an effort to give a fresh lease of life to the corporation, a committee headed by the principal secretary, department of finance, with the principal secretary, department of commerce and industry, and managing director of the corporation as members, has been formed to hold a fresh discussion with the "defaulters."

In insiders are believed the MPSIDC has forwarded a demand of an immediate bail-out package of Rs 350 crore to repay debts (secured loans) of IDBI (Rs 135 crore), Mumbai District Central Cooperative Bank (Rs 90 crore), Bombay Mercantile Cooperative Bank (Rs 14.50 core) and Bonds (Rs 64.79 crore), In addition to this amount totaling Rs 427.99 crore, the corporation has to pay interest of Rs 291.46 crore.

Thus a total of Rs 715.45 crore is needed to revive the corporation since IDBI and Mumbai District Central Cooperative Bank has obtained orders to attach properties of the Corporation.

The insiders have further informed, "The Corporation has demanded a package of Rs 350 crore to revive dialogues with these banks for one time settlement (OTS)."

However Sumit Bose, Principal Secretary Finance denied receiving such proposal and said, "I have no idea if any proposal has not come to my department but the Committee will initiate talks with the corporate houses who owe money to it. Much will depend upon what emerges from the talks."

He however hinted his department is unlikely to provide a bailout package to the corporation.

An insider has also said, "A fresh OTS scheme is being brewed up by the corporation for recovery of ICDs. The new scheme will offer interest rates as low as 1 percent and as high as the prevailing prime lending rates in the banking industry (against the existing 18% in some cases). The committee will decide on case-to-case basis. However there is a remote hope that any of the "defaulters" will repay or come for settlement.

The insider also said, "So far few companies have come forward for OTS scheme. Western Tobacco Pvt Ltd has settled its outstanding of Rs 5.40 crore with OTS of 2.65 crore. Garha Group has opted OTS for 73.07 lakh against Rs 7 crore outstanding, S Kumar's has paid Rs 18 crore against an outstanding of Rs 29.26 crore and Rs 77.37 crore interest. However a similar deal with Steels Tubes of India Limited for an outstanding of Rs 35.33 crore principal and 58.11 crore interest. The company has paid on Rs 1.50 crore but the deal is under litigation since it has not repaid the rest of the amount."

The Corporation has recently received a package of Rs 5 crore from the state government.

"Salaries of employees are covered through repayment of term loans and grants. A case against the defaulters is pending with State Economic Offense Wing. The state chief minister Mr Shivraj Singh Chouhan had few days back assured the corporation that it would not be closed.