Even as the UPA works on a new blueprint for disinvestment, it has revived the strategic sale plan for chronically sick public sector newsprint maker Nepa Limited. With a parliamentary committee scuttling a Bill introduced in UPA?s first innings to disinvest up to 100% stake in Nepa, this time around, the government is planning to carry out the sale by passing a resolution.

The Parliamentary Standing Committee on Industry had asked the government to withdraw The Nepa Ltd (Disinvestment in Ownership) Bill, 2007, citing the rapidly growing demand for newsprint in India and the high dependence on costly imports. Nepa, originally set up as a private firm in January 1947, was the country?s monopoly newsprint producer till 1981.

While newsprint prices had spiraled dramatically last year, they have collapsed in recent months with the economic slowdown affecting global advertising volumes and demand for newsprint slumping. The Centre is now working on a resolution to disinvest from Nepa, which had turned sick in 1998.

?The standing committee did not agree to the views of the Board for Reconstruction of Public Sector Enterprises (BRPSE) that the company should be disinvested in. The issue is still pending. We are planning to take it to Parliament for a resolution,? a senior official in the ministry of heavy industries and public enterprises told FE on the condition of anonymity. The ministry, headed by former Maharashtra chief minister Vilasrao Deshmukh, has the administrative control over the operations of Nepa.

The government had moved the bill in November 2007 seeking the Parliament?s approval to the disinvestment plan. However, the bill was referred to the standing committee a month later for detailed examination. In its report, the committee observed that the company needs capital investment rather than financial assistance from the government to revive. It also reprimanded the government for referring Nepa?s case to BRPSE even though it was pending before the Board for Industrial and Financial Reconstruction (BIFR).

?They (the committee) did not want any disinvestment in the company and said the government should run it. Its view was that Nepa was created a long time back to help in production of newsprint, which we have to import now. So the company should be run as a going concern and not disinvested in. Now, we have to go to Parliament again. Before that we are going to Cabinet soon to decide what type of resolution can be moved,? the official said.

The parliamentary panel had also questioned the need for the government to move a bill to sell its stake in Nepa, since it was never formed by an act of Parliament. So a resolution may be the more appropriate route for the sale.

Defending the need for inducting a private player in the firm?s operations, the official said, ?There are problems of plantation and approval from the environment. You have to get the timber on regular basis, which again is environmentally sensitive area. Because of these problems, the government thinks that it will be best to bring in a private company. This view has been evolved out of a long discussion wit h BRPSE and others, and in that direction we are moving.?

All previous attempts to rope in a private partner for Nepa have failed. In 2000, four firms had submitted the expression of interest (EoI) and two of them carried out the due diligence. However, only one bid was received from Lok Prakashan Limited (Gujarat Samachar) for Rs 15 crore for sale of 72.31% of equity in the company, rendering the process infructuous. In 2003, fresh EOIs were invited, but due to general elections in 2004 the process could not reach a logical conclusion.

Taken over by the Centre in 1959, Nepa?s operations became unviable after cheaper and better quality newsprint made their way into the country in 1992. Absence of any fresh capital investment after 1989 restricted its ability to enhance its archaic technology or expand operations. The company was referred to BIFR in 1998 and subsequently to BRPSE in 2005 for revival.

At the end of March 2008, the company had accumulated losses of Rs 427.27 crore. The outstanding government loan was Rs 151.45 crore and the overdue interest on the same reached Rs 146 crore. The only other PSU that got the Parliament?s nod for divestment in UPA?s first innings was Tyre Corporation of India, but its sale is stuck due to differences with the BIFR.

Past imperfect

1947 National Newsprint & Paper Mills Ltd (NNPM) set up as a private company by Nair Press Syndicate

1949 With project plagued by time and cost overruns, Madhya Pradesh government roped in; takes full control of NNPM

1959 Project costs soar further. State approaches Centre, to whom controlling interest is ceded

1981 NNPM?s reign as the sole newsprint producer in the country ends

1989 NNPM?s name changed to Nepa Ltd; last year when any capital investment took place

1992 Government liberalises newsprint import and allocation policy to allow conditional import of cheaper newsprint

1994-95 Centre puts newsprint imports on Open General Licence list with zero duty; large newspapers sign contracts with foreign suppliers

1998 Failing to keep up with competition, Nepa turns sick, referred to the BIFR

2000 Based on the disinvestment Commission report, Centre initiates sale of 72.31% stake. Of the 4 bidders in the fray, only one puts in a financial bid

2003 Another attempt made to sell Nepa; four bidders respond, transaction documents finalised by February 2004, but Lok Sabha polls scuttle process

2005 Government refers Nepa to BRPSE, which suggests financial package worth Rs 280 crore and selling at least 74% stake to a private firm

Aug 2007 Cabinet approves revival package and 74%-100% stake sale

Nov 2007 Government seeks Parliament nod for stake sale; introduces the Nepa Ltd (Disinvestment in Ownership) Bill, 2007

Dec 2007 Parliament refers the bill to Standing Committee on Industry

Oct 2008 Citing growing newsprint market and high dependence on costly imports, Committee asks Centre to invest more into Nepa instead of disinvesting it; asks for Bill to be withdrawn

Jun 2009 Global and domestic newsprint demand as well as prices collapse, disinvestment of Nepa back on agenda