New lease of life for ITI

The Cabinet Committee on Economic Affairs on Wednesday approved a Rs 1,001 crore (Rs 10.01 billion) revival plan for Indian Telephones Industries.

The CCEA, however, withdrew the restructuring package of Rashtriya Ispat Nigam Ltd since the state-owned unit have turned around and become profitable.

As per the revival plan for ITI, the government would infuse Rs 200 crore (Rs 2 billion) as equity and provide an interest-free loan of Rs 601.53 crore (Rs 6.01 billion).

The loan would be used to provide Rs 458 crore (Rs 4.58 billion) for the Voluntary Retirement Scheme, while Rs 50 crore (Rs 500 million) would be earmarked for capital expenditure, Finance Minister P Chidambaram told reporters after the CCEA meeting. Another Rs 93 crore (Rs 930 million) is to be used for clearing provident fund dues.

The CCEA decided to withdraw its earlier directive to the steel ministry to restructure RINL since it has turned profitable, Chidambaram said. The company made a profit of Rs 345 crore (Rs 3.45 billion) in the first quarter of the current fiscal year. The restructuring package had been approved in May 1998.

The government has written-off the interest and penal interest rate of Rs 23.67 crore (Rs 237 million) for the revival of ITI.

The revival package comes with a rider that the ministry of communication and information technology would come back to the CCEA in a month's time with details regarding technology tie-up and technology transfer.

The finance minister had announced a Rs 500 crore (Rs 5 billion) restructuring plan for ITI in the Budget presented in July.

Telecom department officials said that additional funds had been sought since the losses and dues had mounted in the last few months and working capital was required to help restarting manufacturing at the company.

For the year-ended March 2004, ITI's losses were estimated at Rs 705 crore (Rs 7.05 billion) on a turnover of Rs 1,256 crore (Rs 12.56 billion).

The public sector undertaking incurred a loss of Rs 131 crore (Rs 1.31 billion) during the quarter-ended September 2004, compared to Rs 128 crore (Rs 1.28 billion) in the corresponding period of the previous year. The company has been making losses since 2002-03.

The government holds 77 per cent stake in the company with the remaining shares with the public and financial institutions. The company has seven manufacturing units with two in Bangalore, and one each in Srinagar, Palakkad (Kerala), Rae Bareli, Naini and Mankapur in Uttar Pradesh.