DoD for policy decision on sick PSUs

DoD for policy decision on sick PSUs
Nandita Roy

New Delhi, Nov 23: The Ministry of Disinvestment (DoD) is pushing for a policy decision whereby financial restructuring and a sell-off package for sick PSUs before the Board for Industrial and Financial Reconstruction (BIFR) are done simultaneously.

This comes in the wake of different arms of the government grappling among themselves to untie complicated financial knots in which several sick Public Sector Undertakings under the preview of BIFR have landed themselves, before taking them up for divestment.

The problem has arisen mainly on account of finding ways and means of rolling out sick units from the BIFR’s clutches. As a quasi-judicial body, the Board feels, it alone has the sole authority over PSUs before it. While the Ministry has said it does not mind seeking the Board’s approval on disinvestment, BIFR contends that it alone has the mandate to scout for JV partners for these sick PSUs.

Despite BIFR’s standoffishness, the Disinvestment Ministry is hopeful of getting the government approval to push for financial restructuring and sell-off in these sick PSUs simultaneously. Not only will it help in faster decision making, but there would be better chances of turning them around, officials say. In the case of Pradeep Phosphates, the Cabinet has already cleared a proposal of DoD to finalise a selloff package along with restructuring. This was done to avoid PPL turning a BIFR case by next year. In the last 10 years the government has spent around Rs 36,000 crore in these sick PSUs.

On the other hand, the Department of Expenditure is mulling over pure accounting re-adjustments like writing off loans, converting loans into equity and writing down the equity by writing off the accumulated losses. This would help in turning their net worth positive and thereby bring them out of the clutches of BIFR, they feel.

However, the Department of Heavy Industries is not convinced with the idea. Sources in DHI say every write off is treated as part of expenditure and there is a limit to which the government can resort to this. Also, this cannot be done suo mottu.

At present the Disinvestment Ministry has locked horns with BIFR over finding a JV partner for Jessop & Company, which has been slated for disinvestment in the current fiscal. BIFR has taken it upon itself to find a partner, despite government’s appeal to the Appellate Authority for Industrial and Financial Reconstruction (AAIFR), a higher body. On the contrary, BIFR has already put out an advertisement inviting interested parties. The AAIFR is yet to hear the DHI’s appeal.

Amidst all the confusion, the Finance Ministry’s plans to raise Rs 10,000 crore during the current fiscal threatens to be a casualty.