Steps Taken by the DHI to Revive/Restructure ITS Sick/Loss Making CPSEs
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There are 17 Central Public Sector Enterprises (CPSEs) under the
Department of Heavy Industries (DHI), Government of India, which are incurring
losses. The Ministry’s approach in such
cases is to restructure/ revive these
PSEs to reduce the sick and loss making PSEs as also their aggregate losses.
Renowned consultants are being appointed through competitive bidding for
formulation of appropriate revival plan / strategy to be adopted in
re-structuring these PSEs so as to enable them to reduce their losses and
become profit making organizations. Out
of 15 PSEs which were revived/restructured, 8 PSEs
have started making profit.
Besides reviewing the performance of each CPSE periodically, the
Department also provides budgetary support for
addressing such issues. Italso provides support for financial investment plans
for technological up-gradations of the manufacturing processes of these CPSEs.
Revival schemes involving cash infusion and financial restructuring in
respect of sick PSEs like HMT, NEPA, NPPC, SIL are
under process for approval of the Govt.
The steps taken to revive/restructure sick/loss making CPSEs, like NEPA,
NPPC, HMT Group, TCIL and SIL are:
NEPA Ltd: The Company is a sick unit and under Board for
Industrial and Financial Reconstruction (BIFR) since May, 1998. On 23 August 2007, Cabinet approved revival
of Nepa through a Joint Venture Partner in private
sector by disinvestment of Government of India’s equity, preferably to the
extent of 74% or 100% and introduction of Nepa
Limited (Disinvestment of Ownership) Bill 2007 in the Parliament. The Bill was
referred to Department related Parliamentary Standing Committee (DRPSC) for
detailed examination. The Committee
opined that sincere efforts should be made by the Government to revive NEPA
Limited. “The Nepa Limited (Disinvestment of
Ownership) Bill 2007” lapsed due to dissolution of parliament.
In a bid to revive the company, the Department prepared a revival plan,
which was appraised and approved by the BRPSE.
Accordingly, it is proposed to revive Nepa
Limited through financial restructuring and fresh fund infusion. The estimated
expenditure on Revival of Nepa Limited has been
assessed at Rs. 362.18 crore (GoI
– Rs. 234.18 crore and borrowing from Bank/FI –Rs.
128 crore). In addition, non-fund based assistance of
Rs. 930.14 crore through waiver/conversion of GoI/GoMP
loan/interest etc. The Cabinet Note is being finalized incorporating the
comments of other concerned Ministries/Departments.
Apart from above, the Ministry is giving
continuous support to the company in the form of salary/wages and statutory
dues to its employees. The Ministry has provided Rs. 27.96 crore
to the company during 2011-12. Due to
continuous support in the form of loan for up-gradation, the Company achieved
highest ever turnover in its history during 2011-12.
Nagaland
Pulp & Paper Company Limited (NPPC) : This is
also a sick company and under the purview of BIFR. The Union Cabinet in its meeting held on 8
November 2006 approved the revival of Nagaland Pulp and Paper Company Limited
at an estimated cost of Rs. 552.44 crore with Rs.
261.26 crore as Government’s equity, Rs. 252.99 crore as loan from banks/financial institutions with
Government guarantee and Rs. 38.19 crore as 5% non
cumulative preference share. However, it
was found that the cost of the project escalated to Rs. 1102.85 crore thereby making it unviable proposition with estimated
IRR of 5.5% only.
After protracted deliberations on various options
suggested by the consultant, it was decided to bring up the NPPC project with
reconfigured technology and product mix - both for pulp and paper in place of
original consideration of writing & printing variety of paper only. Investment of estimated cost of Rs. 679 crore has been considered in two phases. A fund based
Capital Investment Subsidy (CIS) 30% of investment for Plant & Machinery
(Rs. 476.47crore) which is approximately Rs. 150 crore
has also been considered. Accordingly, a note for the consideration of PIB has
been prepared and circulated.
Apart from above, the Ministry is giving continuous
support to the company in the form of salary/wages and statutory dues to its
employees. The Ministry has provided Rs. 8.81crore to the company during
2011-12.
Cement Corporation of India Ltd. (CCI): CCI was incorporated in the year 1965 as a company wholly owned by the
Government of India. The company started incurring losses from 1984-85 onwards,
referred to the BIFR in 1996 and declared sick. The Cabinet, at its meeting
held on 9 March 2006, considered and approved a package for revival of CCI, which
included closure and sale of assets of seven non-operating Units and
expansion/modernization of Bokajan, Tandur and Rajban units at a cost
of Rs.90.51 crore, Rs.43.80 crore
and Rs.6.80 crore respectively. The revival package also included measures like
waiver of outstanding interest on Government loans (Rs.886.22 crore), conversion of loan into redeemable preference share
capital (Rs.355.43 crore), waiver of unpaid
Government Guarantee fees on past loans (Rs.10.60 crore),
release of fresh loan (Rs.153.62 crore) and plan
assistance (Rs.30.67 Crore) and Government guarantee
for obtaining working capital loan from commercial banks without payment of
guarantee fees (Rs.15.70 crore).
The Government has also approved implementation of
2007 pay revision, enhancement in the age of retirement from 58 to 60 years and
freezing of interest on non-plan loan of Rs. 128.62 crore.
The performance of the company has improved in
terms of production and turnover. It has started earning net profits
consistently from the year 2006-07.
Heavy Engineering
Corporation Ltd. (HEC): HEC was
incorporated on 31 December 1958 with the objective of achieving self-reliance
in the field of design and manufacture of heavy equipments and machineries for
core industries, especially the steel industry. Subsequently, HEC diversified
its area of operation in the field of mining, railways and defence.
The company became sick and the BIFR passed orders for its winding up in July,
2004. In fact, despite the vast infrastructure facility, the company had been
incurring losses in the pastthroughout, except for the years 1976-77, 1977-78
and 1988-89, till BIFR recommended its closure.
Pursuant to the appeal against the orders of BIFR,
a revival package was approved by the Government in December, 2005. With the
implementation of the revival package, there had been marked improvement in the
performance of the company. However, to address certain other issues affecting
the performance of the company, a further package was approved by the Government
in September, 2008. These packages included conversion/waiver of outstanding
government loans and interest, provision for
bridge loan, settlement of various liabilities through transfer of land
and mobilization of resources from surplus assets for CAPEX, settlement of
dues, etc and government guarantee to meet working capital requirements.
Under these two packages, non-cash assistance of
Rs.1307.05 crore and cash assistance of Rs.60 crore was given to the company. The Government has also
approved implementation of 2007 pay scales and extension of Government
guarantee of Rs. 253 crore up to 31 March 2014 to
ensure availability of working capital loans from banks. With the implementation of the revival
package, the company has come out of sickness and is making net profits since
2006-07.
Scooters India Limited (SIL): SIL was set up in 1972 with a second hand plant
bought from M/s. Innocenti of Italy is engaged in
manufacturing and marketing of three wheelers. SIL
incurred
losses continuously since inception and was declared as sick company
on 11 August 1992 and came under the purview of BIFR. Consequently, a
revival
scheme for SIL was sanctioned on 9 September 1996. However, SIL again
started incurring operating losses from 2002-03 and net losses
from 2006-07 onwards. SIL was declared sick in 2010 and came under the
purview
of BIFR.
Based on the
recommendations of BRPSE, a proposal for revival of SIL by Reduction/transfer of entire Government equity
to a suitable identified strategic partner through Department of Disinvestment
was initiated. For implementing the Cabinet decision, a Resolution
seeking Parliamentary approval to facilitate induction of a strategic partner
for revival of SIL was moved and listed during the Monsoon Session, 2011 of
Parliament. Subsequently, the Ministry re-examined the matter and the
resolution introduced was withdrawn. In
view of improved performance of the company during 2011-12, it was decided to
revise the proposal approved by Cabinet on 19 May 2011. A reference was made to Prime Minister’s
Office (PMO). PMO directed that revival proposal be brought before the
Cabinet. Accordingly, a joint study was
carried out by Automotive Research Association of India (ARAI) and Scooters
India Limited (SIL). Based on the study, a revised proposal for revival of SIL
has been prepared and proposed by SIL envisaging infusion of Capex/working capital and financial restructuring through
waiver/conversion of GoI. The proposal of revival of SIL on its own is
at present under process.
Tyre Corporation of India Limited (TCIL): TCIL was incorporated on
5 March 1984 by vesting the assets of two sick companies namely, M/s. IncheckTyre Limited, Kankinara
and M/s. National Rubber Manufacturers Ltd., Tangra
by the Nationalisation Act No.17 of 1984. Initially,
TCIL was referred to the BIFR in May 1992. Cabinet in its meeting held on 12
June 2000 approved ‘in principle’ the financial and capital restructuring
package for the Tyre Division, Kankinara
and directed for exploring the possibility of Joint Venture(s) through
strategic sale(s). For the Tangra Unit, the Cabinet
directed closure/winding up by offering Voluntary Separation Scheme (VSS) to
its employees. Tangra Unit was closed in August, 2001
and assets were sold to the highest bidder by Asset Sales Committee under the
supervision of BIFR.
Subsequent to above, the proposal for revival
of TCIL was considered by the Cabinet, in its meeting held in November, 2008
wherein it approved the financial restructuring of TCIL through cleaning of the
balance sheet and subsequent disinvestment of the company. Consequently, the financial sanctions for
waiver of interest on GoI loans, unpaid guarantee fee
and reduction of duty (enhanced) amounting to Rs. 815.59 crore
have been issued. At present the disinvestment
of TCIL through outright sale, through Department of Disinvestment (DoD) is under process.
HMT Ltd: Since the company had been incurring loss
over the years, a revival plan was mooted. The revival plan was considered by
BRPSE in 2006. Based on the
recommendations of BRPSE a draft Note for CCEA was formulated and circulated to
concerned Ministries/Departments for obtaining their comments. The revival
proposal was not supported by Ministry of Finance and Planning Commission. The
company was asked to get the revival plan vetted by a technical consultant. The
revival plan was revised in the light of the recommendations of the Technical
Consultant (ARAI) and finalized. The Note for CCEA was sent to Cabinet
Secretariat. The note was returned with the direction for obtaining fresh
approval of BRPSE in view of the changes in the economic scenario. The company
has been incurring loss over the years and it is unable to generate adequate
resources to make payment of statutory dues to its employees. The total Government loan including budgetary support for statutory
dues as on 31 March 2012 is Rs. 417.62 crore. It was decided by this Department (DHI) that an experienced consultant should be
engaged to study the HMT Group of companies and recommend revival with a firmed
up business plan or otherwise. Based on the report of the consultant, a revival
plan was formulated and sent to BRPSE for consideration and approval. BRPSE in
its meeting held on 29 March 2012 considered the revival plan and approved it.
The Note for the Union Cabinet based on the recommendations of BRPSE is under
consideration. The revival plan envisages cash infusion of Rs. 441.30 crore and non-cash assistance of Rs. 551.69 crore.[Total Rs. 992.99 crore].
HMT
Bearings Ltd:HMT Bearings Ltd is a BIFR referred company since December, 2008. A revival
plan sanctioned in 2005-06 could not yield the desired result as the company
could not raise loan for funding CAPEX and working capital for an amount of
Rs.17.40 crore against GOI guarantee as envisaged in
the revival plan. While the revival plan
was sanctioned in 2005-06 the GOI guarantee could be issued in August 2008 as
the banks were not willing to extend loan at the interest rate prescribed by
Ministry of Finance. The performance of
the Company deteriorated sharply and the Company has been referred to BIFR
towards December, 2008 for declaring it as a sick unit.
The company has been incurring loss over the years and it is unable to
generate adequate resources to make payment of salary/wages to its employees. The total Government loan including budgetary support for
salary/wages and statutory dues as on 31 March 2012 is Rs. 43.03 crore.
It was decided to appoint an experienced Consultant to study the HMT
group of companies including HMT Bearings Ltd. and make recommendations with a
firmed up business plan or otherwise.
Based on the report of the consultant a revival plan for HMT Bearings
Ltd has been under process for obtaining approval of BRPSE. The revival plan
envisages Cash infusion of Rs. 55.91 crore and
non-cash assistance of Rs. 56.92 crore [Total Rs.
112.83 crore].
HMT Watches
Ltd: As regards the HMT
Watches Ltd. the company had been incurring losses from its inception as
subsidiary in the year 2000. A revival plan was mooted and it was approved by
BRPSE in 2006. A draft Note for CCEA on the revival proposals based on the
recommendations of BRPSE had been circulated to concerned
Ministries/Departments. As the revival plan was not supported by the Ministry
of Finance and Planning Commission the proposal was reviewed and the Company
was asked to get the revival plan vetted by a Consultant with respect to
marketing, product diversification and technology. The Company appointed a
Consultant M/s ICRA Management Consultancy Services Ltd. and based on the
report of the Consultant the company prepared the revised revival
proposals. The revival plan had been
under consideration and JV formation along with limited financial restructuring
in order to clean up the balance sheet was mooted.
The company has been incurring loss over the years and it is unable to
generate adequate resources to make payment of salary/wages and statutory dues
to its employees. The total Government loan including
budgetary support for salary/wages and statutory dues as on 31 March 2012 is
Rs. 694.52 crore.
It was decided to appoint an experienced Consultant to study the HMT
group of companies including HMT Watches Ltd. and make recommendations with a
firmed up business plan or otherwise.
Based on the report of the Consultant a revival plan has been formulated and it is under consideration for obtaining
approval of BRPSE.The revival plan envisages cash
infusion of Rs. 252.70 crore and non-cash assistance
of Rs. 1247.00 crore [ Total Rs. 1499.70 crore].
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