‘Disinvest or write off Rs 24k cr to revive PSUs’

New Delhi, August 20: The fertilisers department has suggested that the Government should invite private sector to revive six ailing units of two state-owned fertiliser companies — Fertiliser Corporation of India Ltd (FCIL) and Hindustan Fertiliser Corporation Ltd (HFCL). In doing so, a majority 51 per cent must be retained by the government to maintain the public-sector character of the six units located in Barauni, Talcher, Ramagundam, Gorakhpur, Durgapur and Sindri.

In a proposal to be placed before the Cabinet, the department has said by doing this the budgetary support required to revive the six units would be cut to Rs 750 crore per unit as against Rs 1,200 crore that would be otherwise needed if the units continued to be fully owned and operated by the two companies. The need for a budgetary support of Rs 750 crore too could be done away with if the companies were allowed to raise funds from the market, it said.

While this option to turn around the state-owned fertiliser companies may find support in some sections of the government, the department has pointed out that disinvestments was not in line with the UPA government's policy to strengthen PSUs. Hence, the alternative option that the department has favoured is to write off the outstanding principal and interest on loans extended by the Centre to the two companies besides enhancing budgetary support for the department.

The total package, under the second option, adds up to a staggering Rs 31,500 crore. It entails writing off Rs 24,168 crore debt in one shot and a Budgetary support of Rs 7,200 crore over the next four years. The department's pitch is that the revival is necessary to lower the country's subsidy bill and also ensure self-sufficiency in the sector.

According to the department, instead of shelling out huge moneys for importing urea at $700 a tonne now, reviving a 1,155 MT unit will help the government save Rs 1,455 crore. Domestic demand for urea has shot up 30 per cent to 26.1 million tonne in 2007-08 and is projected to further rise to 35.43 million tonne this year. In the last fiscal, India imported 6.9 million tonne, 47 per cent more than in 2006-07.

“The proposed support will be recovered by the government within two years from the estimated savings in subsidy. The same will be recovered faster in the event of further increase in international prices of urea,” it said, making a strong pitch for the package.

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