While strategic sale of profit-making and sick PSUs are yet to gather pace, the Cabinet will likely give its nod for the closure of five more ailing PSUs including PEC and Bharat Wagon & Engineering soon, accelerating the process of dispensing with the firms that are a constant drain on the exchequer.
PEC, formerly Project and Equipment Corporation of India, is an export-import unit under commerce ministry; it incurred a loss of Rs 1,142 crore in FY16, while Andaman & Nicobar Forest Plant Development Corporation, another PSU identified for closure, suffered a loss of Rs 49 crore in the year.
The accumulated losses of these five units are many times their losses in FY16. Out of the 16 units, which were approved for closure by the Cabinet in last 9-10 months, four including Hindustan Photo Films and Tyre Corporation of India are already under liquidation, while the remaining are at various stages of a time-bound closure programme.
Among the 6,588 employees of the 21 sick PSUs who took or are being offered VRS, most belonged to Hindustan Cables, HMT Watches, Hindustan Organic Chemicals and the Kota unit of Instrumentation.
In September 2016, the government announced timelines for the disposal of movable assets, sale of land and retrenchment of employees not opting for VRS to fast-track the closure of sick PSUs.
According to the department of public enterprises’ (DPE) new guidelines, the sick units will be closed within one year from the date of issue of minutes of the Cabinet approval; currently, the process drags on for years. In order to facilitate this, the settlement of statutory dues and payment to secured creditors are now being completed within two months.
VRSs at PSUs have gathered some extra momentum after the Modi government sweetened the package in September last year.
Under the September 2016 scheme, employees are offered VRS packages at notional 2007 pay scales. In addition, all dues including salary arrears will be settled at the time of separation. Prior to this, no settlements were allowed; in some cases, the staff had to accept early 1990s pay scales.
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Besides closure of sick units, the Cabinet gave an in-principle approval in October last year of about 20 PSUs (profitable as well as loss-making) for strategic sale. Recently, Air India was added to the list for strategic disinvestment. The national carrier has debt/dues worth Rs 60,000 crore, half of which may be written off by the government before it looks for a suitor.