Sick PSUs a huge burden on the exchequer: Media

AS MANY as 53 loss making PSUs are making the government cost Rs 53 crore per day. These PSUs have incurred losses amounting to Rs 60,000cr, says a media report citing statistics from the ministry of heavy industries. The reasons for such a poor show include obsolete plant and machinery, low capacity utilisation, weak marketing strategies, lack of business plans among others.
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losses amounting to Rs 23755 cr, Air India Rs 18,439 crore, Hindustan Photo Films Manufacturing Company Rs 4474 crore, Hindustan Cables Rs 2418 crore and Hindustan Fertiliser Corp Rs 1142 crore caused the huge blow to the exchequer.
Though the government is not pursuing any clear cut policy about reviving or shutting down ailing PSUs, the Cabinet Secretariat had earlier asked the department of disinvestment (DoD) under the finance ministry to prepare a clear roadmap for over 42 loss-making central public sector undertakings (CPSEs) for disinvestment, revival or closure purposes. There are 65 loss-making CPSEs which have been identified over last several years. Of this list, the government has decided to shut down five CPSEs. There are 11 others which will stop getting the non-plan budgetary support from next financial year and may ultimately be closed.
The erstwhile Board for Reconstruction of Public Sector Enterprises (BRPSE) has recommended revival packages for 48 CPSEs, which has been approved by the government, but still far away from getting implemented.
Following instructions from the Prime Minister’s Office (PMO), the Cabinet Secretariat has asked the department of disinvestment to chalk out a strategy of these loss-making CPSEs. Some of these CPSEs also fall in the category of ‘sick’ units.
A CPSE is declared sick after it has accumulated losses in any financial year equal to 50 per cent or more of its average net worth during four preceding years. There are 65 units in the list of sick public sector units as of March 31, 2014.
The CPSEs which are part of this list include MTNL, Air India, Bengal Chemicals, Konkan Railway Corporation, Hindustan Shipyard, HMT, Bharat Coking Coal, ITI, Bharat Wagon and Engineering, Tungabhadra Steel, Scooters India, Heavy Engineering Corporation, National Jute Manufacturers, Burn Standard, Fertilizer Corporation of India, British India Corp among several others. The government is contemplating a slew of measures for revival of sick or loss-making CPSEs. Setting up a separate entity funded by financially strong CPSEs to look at management and revival of sick companies is one such measure. Cash-rich profitable PSUs can also be roped in to support and revive the loss-making/sick CPSEs as part of their mandatory corporate social responsibility (CSR) practice.
Meanwhile, five sick central PSUs that are facing closure in next three months will require funds towards the voluntary retirement scheme for around 2,800 employees which are on rolls. These five sick CPSEs are HMT Bearings, HMT Watches, HMT Chinar Watches, Tungabhadra Steel Products and Hindustan Cables.
According to Anant Geete, the Union minister for heavy industries and public enterprises, the government is also looking at creating a land bank pool comprising the surplus land with PSUs.
The NDA government has already decided to give VRS to 2800 employees of these sick central PSUs which is expected to free assets worth Rs 22,000 crore.
As per the government estimates, the cost of shutting these five sick units will work out to Rs 1,400 crore while the asset value of these companies stand at Rs 22,000 crore which includes all the immovable properties including land, plant and machinery. These will be sold to interested parties in “as-it-is, where-it-is” basis. “The decision for the sale of property is yet to be taken”, the minister said.
Earlier, the Centre asked cash rich CPSEs to come out with a detailed road map for using their cash surplus to turn around sick CPSEs, said media reports. As on March 31, 2014, profitable CPSEs had over Rs 2.63 lakh crore as ‘cash and bank balance’.