PSU bailout not without strings

Centre gives Rs 517 cr to clear PSU dues

The government's Rs 517 crore package for clearing the pending salaries and statutory dues of employees of 24 sick public sector undertakings (public sector undertakings) has come with a lot of strings attached to it.

In return, the Centre has asked the boards of these public sector undertakings to give a written commitment stating that they will not default on payments in future and will step up production to meet their running costs. They have also been asked to dispose off surplus and non-core assets.

Sources in the ministry of heavy industries, however, clarified that while the letter of commitment was "not conditional", it was a first step towards restructuring the public sector undertakings.

The Centre has sought immediate action. The PSU boards have been told to expedite work so that production targets can be met on time. They have also been asked to rationalise manpower and undertake other cost-cutting measures.

Further, the 24 public sector undertakings will have to ensure that they book enough orders to sustain operations and reduce their inventory and sundry debt levels.

"This is a reminder to the public sector undertakings that now that their dues have been cleared, they must perform," the source said.

This one-time compensation is in line with the government's strategy of reviving sick public sector undertakings.

The decision will result in the liquidation of outstanding statutory dues, salary and wages of nearly 45,000 employees of these public sector undertakings. This is to be followed by organisational, financial and operational restructuring.

These loss-making public sector undertakings have been facing difficulties over large overheads, low technological profile, obsolete plants and dwindling working capital availability.

The fresh infusion of funds is also aimed at unlocking the working capital, including banking facilities, which have been frozen owing to continued default in payment of statutory dues.

Of the 28 loss-making public sector undertakings under the heavy industries ministry, 4 have been meeting their salary commitments. These are BBJ Construction Co Ltd, Hindustan Salt Ltd, Nagaland Paper and Pulp Co Ltd and Sambhar Salts.

Despite the financial package, 7 of these 24 public sector undertakings face closure.

Heavy Industries Minister Santosh Mohan Deb said the payment of statutory dues, like provident fund, gratuity, pension etc of employees of 21 public sector undertakings would be taken up in the first phase.

The statutory dues of employees of three public sector undertakings "" Heavy Engineering Corporation, HMT Bangalore and Hindustan Cables "" will be settled in the first phase. Their provident fund dues will be paid by December when Parliament approves the supplementary demand for grants in the Winter Session.

The minister said the Cabinet had also enhanced by 50 per cent the ex-gratia paid on opting for a voluntary retirement scheme (VRS) by employees of Central PSEs that could not implement the revised pay scales under the Fifth Pay Commission.

This is expected to make the VRS option attractive, given that the government is keenly pursuing restructuring of these public sector undertakings.