Centre-BIFR deadlock stalls Tyre Corp divestment

Written by Praveen Kumar Singh | Praveen Kumar Singh | New Delhi | Updated: Jun 28 2009, 03:10am hrs
While the UPA is looking to fast-track disinvestment procedure in its second innings, its attempt to sell West Bengal-based sick PSU Tyre Corporation of India Ltd (TCIL), the single PSU that received Parliamentary approval in 2007 for a strategic sale, has hit the roadblock owing to the Centres differences with the Board for Industrial & Financial Reconstruction (BIFR).

As per the recommendation of the Board for Reconstruction of Public Sector Enterprises (BRPSE), the UPA had sought Parliaments nod in 2007 to change the public sector character of TCIL. After the Bill was cleared by both the Houses of Parliament in order to get a better valuation for the firms disinvestment, the Centre cleared a Rs 800-crore financial restructuring package in November 2008 that included a mix of waivers and sops.

But a slight difference in perception between the government and the BIFR has hit the TCIL sale process, yet again. At a hearing on May 19, the BIFR, to whom TCIL was referred to in 1992, scuttled the Centres plans by asking the government to sell TCILs assets to clean up its balance sheet prior to any sale.

We are in favour of the outright sale of the company as a going concern, not to close it and sell it. The government is sacrificing dues only to see the company run by some private sector firm. But BIFR has taken a different view on the matter. How will a private player accept a company with all its liabilities" heavy industries secretary Satyanarayan Dash told FE.

We want the company to be disinvested in through outright sale, not a partial sale. We are writing to BIFR specifying our point and will wait for BIFRs next order so that we can proceed, Dash stressed.

By 2007-08, TCILs net worth was in the negative at Rs 688.12 crore, with accumulated losses of around Rs 800 crore. The land, machinery and building of the company are valued at around Rs 199 crore. There are 210 employees working on the companys roll, down from 354 in 2004.

But even as it continues to bleed the exchequer, the disinvestment department cant do much about TCIL. We cant initiate the process for TCILs sale on our own. The department of heavy industries has to resolve these issues and move the proposal for its strategic sale. Till then, it remains in cold storage, a senior official in the department said.

Under the restructuring plan cleared by the Cabinet last November, the government has waived the entire outstanding interest of Rs 547.09 crore on government loans. The firms income tax liability would also be waived, in addition to offering the companys employees the benefits of the wage revision of 1992, with effect from March 2004.

TCIL was created after nationalising Inchek Tyres and National Rubber Manufacturers to protect employment of around 4,000 people and ensure automotive tyres to state transport utilities, government departments and defence. However, the companys net worth became negative in 1992 and it was referred to BIFR. With the UPA government coming into power, the case was transferred to BRPSE in 2005.

At present, the company is not producing any of its brands and is utilising entire operating capacity to produce tyres for private manufacturers including JK Tyre & Industries, Ceat Ltd and Birla Tyres Ltd.

Timeline

1984: Inchek Tyres and National Rubber Manufacturers nationalised to form TCIL to protect employment of around 4,000 people and ensure supply of automotive tyres

1992: TCIL becomes defunct; referred to the Board for Industrial & Financial Reconstruction

2005: UPA refers TCIL to the Board for Reconstruction of Public Enterprises (BRPSE)

2006: BRPSE recommends a Rs 800-crore revival package for TCIL

April 2007: Finmin questions need to be in business of making tyres. To keep option of complete exit open, Tyre Corporation of India Ltd (Disinvestment of Ownership) Bill, 2007, introduced in Parliament; cleared by both the Houses.

November 2008: Centre clears financial revival of firm to clear way for stake sale.

May 2009: BIFR disagrees; asks Centre to sell TCILs assets before inducting a private partner