After its repeated attempts to recover outstanding dues from several public sector units failed, State Bank of India has asked the Employees? Provident Fund Organisation (EPFO) to waive dues of nearly Rs 30 crore from 20 PSUs. But the EPFO board?s Finance and Investment Committee (FIC) has refused SBI?s request and asked EPFO to take up the matter of default with the central and state governments, which stood guarantee to these bond issues.
While these dues pertain to the period prior to September 2008, when SBI was EPFO?s only fund manager, the FIC has asked EPFO to instruct its three new fund managers-Reliance Capital AMC, HSBC AMC and ICICI Prudential AMC – to introduce a penalty clause in bond purchase agreements to avoid such defaults, going forward.
As of December 2008, 20 public sector undertakings owed Rs 29.46 crore to EPFO. While the Uttar Pradesh State Finance Corporation had the highest outstanding dues of Rs 23.24 crore, even blue-chip PSUs like Power Finance Corporation (PFC) have reneged on their dues to EPFO (adding up to Rs 7.79 lakh).
Ironically, the EPFO had recently got a nod from the FIC to raise the investment limit in bonds of AAA-rated PSUs to 40% of their net worth from the current level of 25%. The decision was specifically aimed at allowing EPFO?s fund managers to invest more in companies like PFC that issue bonds more frequently and deliver high returns. SBI?s call to waive the overdue interest came after repeated attempts to ask companies to clear their dues. ?Repeated reminders haven?t evoked any positive response and all our letters remain unresponded,? was SBI?s standard status report on virtually all the eleven state and central government bond issuers that have failed to pay overdue interest.
For instance, in the case of Himachal Pradesh Roads and Other Infrastructure Development Corporation (HPRIDC), SBI wrote to the regional provident fund commissioner (investment) to waive the overdue interest of Rs 4.71 lakh owed by the company, saying that the company is ?not responding? to the reminders. ?The overdue interest has been claimed by our Securities Services Branch (SSB), Mumbai, (but) on account of postal delay/ realisation time in receiving coupons/partial redemption/ full redemption proceeds, HPRIDC is not responding to the numerous reminders of our SSB, Mumbai,? SBI wrote.
The matter was considered by FIC in a meeting in late March. However, it rejected SBI?s suggestion, saying that the regional provident fund commissioners (RPFCs) should be asked to recover the dues either from the company or the guarantors. ?The RPFCs should be given specified time for recovery and the status or recovery report note should be placed before FIC,? one of the committee members said. Apart from the 11 firms that haven?t paid interest, the FIC also examined the status of defaulters that include sick central PSU HMT, which routinely receives financial assistance from the central government to continue operations, and the Bangalore Mahanagar Palika, which owes Rs 78.65 lakh to EPFO. Central PSU Richardson and Cruddas Limited has defaulted on payments of over Rs 1.25 crore, but the matter has been referred for arbitration.
Two state public sector firms from Uttar Pradesh, UPSFC and PICUP, have turned defaulters owe over Rs 25 crore to EPFO. The Union Labour Secretary has written to the state chief secretary for recovery of these dues. The labour ministry is also taking up interest dues? payments with the Himachal Pradesh chief secretary in the case of HP State Finance Corporation.