The fate of Mandya which is a wholly-owned subsidiary of the central public sector unit, Hindustan Paper Corp Ltd, is likely to be decided on May 27. On that day, the Appellate Authority for Industrial & Financial Reconstruction (AAIFR) is scheduled to meet and discuss the liquidation of the unit as prescribed by the Board for Industrial & Financial Reconstruction.

Earlier, the Union government made a futile attempt to privatise the Mandya mill. It finalised a Rs 48-crore deal with Indian Granite Pvt Ltd of the Manasa Group which is owned by a non-resident Indian. Indian Granite worked out a revival package, but failed to put in the token credibility amount of Rs 2 crore. Sources in Hindustan Paper Corp told The Financial Express that the Union secretary, heavy industry took the initiative to ropein TNPL for Mandya.

"The Union secretary P Shankar is a close friend of the present chairman and managing director of TNPL, N Narayanan. It was learnt that Shankar initiated the whole move by requesting his friend to take over Mandya. TNPL's board also discussed the matter but preferred to test-run the unit for a year before taking it over," sources said.

TNPL has already conveyed its decision to the government but the Union ministry of heavy industry is yet to spell out its decision. "At present, TNPL is awaiting the Union government nod. They cannot make a further move unless the government agrees to their proposal. As of now, Hindustan Paper is not aware of any developments," the sources added.

Industry sources said the government is likely to announce its decision before the AAIFR hearing on May 27.

"May be a day or two before the AAIFR hearing, the government will declare its stand on the matter," an industry observer said. However, he cautioned that AAIFR is unlikely to accept the TNPL proposalto test run the unit for a year only.

"This is a new situation where a public sector unit is opting to test run another sick public sector mill prescribed for liquidation, before deciding on a final takeover. TNPL has ruled out all joint venture proposals for Mandya, but is yet to give a concrete proposal for its revival. In this situation, it is most unlikely that AAIFR will accept this new arrangement.

It may prefer to go ahead with the winding-up process," the observer said.