The government plans to rework the revival package for sick public sector undertakings (PSUs) with a substantial increase in funds for technological upgradation and modernisation of these loss-making entities.
This will be a big departure from the existing practice where major part of the financial package for sick units are given in the form loan and interest write offs. The changes will be implemented in all new cases of financial restructuring suggested by Board of reconstruction of Public Enterprises (BRPSE).
?It has been observed that often, the main reason for failure of revival packages is absence of adequate funds for modernisation and technological upgradation of loss-making units. This is important to ensure that revival packages become sustainable. The changes will address this issue and help revive the PSUs in real terms,? said an official in the department of heavy industries.
Under the new scheme for reviving sick PSEs, all the administrative ministries under whose jurisdiction the sick PSEs fall will be asked to substantial hike the portion of fund for modernisation and upgradation. These could be 50% of the total sum approved for reviving a sick unit or higher. ?The quantum could vary, the allocation will have to increase,? said another official of the department.
The changes are being considered as out of total assistance of R23, 612 crore approved by the government (Cabinet/CCEA) for revival of 42 CPSEs so far, a sum of only R3,290 crore has been given as cash assistance for modernization and technology upgradation of these sick PSEs. This has resulted in several sick PSEs continuing to make losses despite the waivers given by the government.
In totality, out of a total proposal of 67 companies, BRPSE has given recommendations for revival of 59 CPSEs at a cost of R34,853 crore but has suggested only R5740 crore assistance to these sick units as cash assistance which could be used for carrying out the modernisation programme.
The major companies that have received assistance by way of revival package include Praga Tools, Central Inland Water Transportation Corporation, Hindustan Antibiotics, Hindustan Insecticide, Bharat Pumps and Compressors Ltd, Bharat Refractories etc. As per a Public Enterprises survey, 54 out of 213 CPSEs posted a combined loss of R14,424 crore in the year 2008-09 and losses of several of these units units has further increased now adding more pressure on the government to release funds.
As part of long term policy to handle sick entities, heavy industries ministry has also decided to offer some of the sick units to other financially stronger PSEs. In this regard, Bharat Refractories has been taken over by SAIL while BHEL has taken up the revival of Bharat Pumps and Compressors. Similarly, Railways would take over revival of wagon and Engineering Company Ltd. In addition, a few units have also been identified for revival by inducting a joint venture partner or disinvestment by bringing inn a strategic partner. Perpetual loss making entities will be offered for sale by inducting a strategic partner.