With 77 loss-making PSUs running up losses of R27,500 crore in FY15, and another R38,000 crore in the two years before that, most will welcome last week’s Cabinet decision to start shutting various PSUs and selling a strategic stake in others. Not only are these PSUs making huge losses, they have a very large debt burden—Hindustan Cables, one of the PSUs to be shut, made losses of R900 crore in FY15 and has long-term loans of around R6,000 crore; Hindustan Photo Films, to cite another such case, made losses of R2,200 crore in FY15 and has outstanding loans of over R10,000 crore. A recent CAG performance audit of PSUs, in fact, pointed out that 11 of the 34 listed PSUs have an interest cover of less than 1—67 of the 124 unlisted central PSUs have this dubious distinction—and can never be revived in a business-as-usual scenario.
The problem with last week’s momentous decision, however, is that it was not accompanied by the usual Press Information Bureau press releases that always follow Cabinet decisions. One reason, perhaps, is that what was given was only an ‘in principle’ approval—as and when each PSU is ready for a stake sale, it will have to be formally okayed by the Cabinet. In other words, it may happen or it may not.
The only place where there is some certainty, going by finance minister Arun Jaitley’s briefing, is that the PSUs which have been selected for closure will not come up to the Cabinet for approval again. Which PSUs are in this list is also not known formally, but PSUs like Hindustan Photofilms are supposed to be on it. What makes it more likely that these PSUs—NITI Aayog had recommended 26 PSUs be wound up—will be closed quickly is that the department of public enterprises has already issued guidelines which deal with the timeline for the winding up.
So, for instance, all voluntary separation schemes are to be based on the salary scales of 2007; all movable assets are to be sold within three months of ‘zero date’ and employees who do not avail of VRS are to be retrenched within four months of ‘zero date’, etc. Not having a formal roadmap, for both strategic sales and winding up, of course, is an unsatisfactory way of doing things. But it has to be kept in mind, many of the government’s decisions—cutting LPG and kerosene subsidies at regular intervals or removing people from the list of those entitled to LPG/kerosene subsidies—have also been done in the same low-key way. One advantage of doing so is that, with no formal list of PSUs to be shut or divested, the chances of a concerted opposition building up with workers from different PSUs—gets diffused. Though a formal road-map is more appealing, perhaps there is some merit to the low-key approach.