Rs 418 cr needed for PSU revival

Contrary to the general impression, the revival of under performing public sector companies is not a costly exercise with Board of Reconstruction of Public Enterprises coming out with recommendations that have kept the need of infusion of fresh funds to the minimum.

But despite working overtime to formulate the revival schemes, there has been considerable delay in their approval sought by administrative ministries from CCEA.

The Board has, therefore, been asking for "fast track approval system" permitted in the past for the Ministry of Disinvestment.

Lack of timely action would otherwise hurt these companies further. "For the implementation of BRPSE's recommendation on turnaround package for over 30 enterprises, fresh infusion of Rs 418 crore (Rs 4.18 billion) will be required of which Rs 94 crore (Rs 940 million) will go towards funding voluntary retirement scheme for the workers of these companies," sources told PTI.

The Board is also of the view that productive employment should be increased after revival, which would eliminate the need for voluntary retirement service.

The Board has also ensured that the companies would return a large part of the funds to the government from the sale of surplus assets in the next 2 to 3 years so that the cash infusion would be in the nature of bridge loan.

The waiver of loan and interest that would be required for revival of the 30-odd companies cleared by BRPSE would be close to Rs 3,000 crore (Rs 30 billion), while in several cases the government would have to convert small part of its loan and interest totaling around Rs 450 crore (Rs 4.5 billion) to equity, sources added.

Since the government was not getting back its loans from the PSUs, the waiver would not hit it hard. This would also have been needed if it closed down the companies or decided to sell them to private players.

In case of Hindustan Salts and Bridge and Roof, the cabinet has already cleared fresh infusion of Rs 7.40 crore (Rs 74 million) and Rs 60 crore (Rs 600 million).

The revival package for HMT Bearings will require Rs 7.40 crore of fresh funds from the government while for Bharat Wagon this sum would be Rs 25.66 crore (Rs 256.6 million), of which Rs 10 crore (Rs 100 million) will be for VRS.

In case of HMT Machine tools Rs 180 crore (Rs 1.80 million) would have to be pumped in while in Hindustan Antibotics Ltd Rs 80 crore (Rs 800 million)  would be required of which Rs 34 crore (Rs 340 million) is needed to fund VRS.

Hindustan Antibiotics had first agreed to sell the surplus land and raise around Rs 62 crore (Rs 620 milllion) but later decided to set up a biotech park there.

The Cement Corporation will require fresh infusion of Rs 28.67 crore (Rs 286.7 million), including Rs 25 crore (Rs 250 million) for VRS while the rest of the money needed for revival will come from sale of seven units.

In case of Central Inland Waterways Corporation, the board has approved a revival plan of Rs 17 crore (Rs 170 million) all of which will be for VRS.  Garden Reach Ship Builders are also very keen to take over the Rajabagaon Dockyard of CIWTC.

After formulation of revival packages, companies like Bridge and Roof, Praga Tools and Mecon, whose revival packages are awaiting government nod, have already made profits in financial year 2004-05.

They have also been making profits in the first half of 2005-06, along with others like Hindustan Salts, Eastern Coalfields, HMT, Bharat Bhari Udyog Nigam Ltd, BBJ Construction Company, Braithwaite and Bharat Wagon.