Govt aid for sick PSUs with strings

The government intends to decide on reviving ailing public sector enterprises based on their "innovative capacity" as well as their "implementation capacity".

Innovative capacity refers to cash flow, profitability and growth rate, and earning power of the company. Implementation capacity comprises expertise, marketing, technology and funding capacity.

In its note to the consultative committee on restructuring of public sector enterprises, which met last week, the ministry of heavy industries indicated that the government's stance in deciding on revival or closure of PSEs would also hinge on the vulnerability position and reserve capacity.

The vulnerability position would be worked out on the basis of the company's cash flow concentrations by products and sales, debt maturity, fixed charge coverage, pace of technological change and adaptability and the cash flow variability, the ministry said in its note.

"The efforts at restructuring would aim at maximisation of the market value of the enterprise," the ministry said.

The ministry of heavy industries would be the secretariat for the Board for Reconstruction of PSEs (BRPSE). It has referred 28 companies, of the 36 under its purview, to the board. The BRPSE is expected to be constituted by the month-end.

The eight-member consultative committee on PSE restructuring has endorsed the government's steps towards restructuring the PSEs.

It also recommended that implementation of the decisions of the Board for Industrial and Financial Reconstruction should be verified. Of the 240 PSEs in 1992, 70 were referred to the BIFR. While 25 were identified for closure, only 14 have been closed under the Industrial Disputes Act.

The note said a large number of the central PSEs had lost the traditional organic linkages after liberalisation. The revival of these units would require restoration of these linkages, including the preferential treatment given to them, it added.

While disinvestment of the companies led to partial capital restructuring, the efforts at revival "" in line with the National Common Minimum Programme "" will go a step forward, it said.

The means of finance of the central PSEs could range from write-off by the government, waiver by financial institutions, sale of assets or raising funds against government guarantee.

The Comptroller and Auditor General report of 2002-03 had referred to poor project planning, cost overruns in project implementation, production bottlenecks and overdependence on government orders, apart from traditional problems of low capacity utilisation, obsolete technology and resource crunch.