Getting govt to pay its dues: If the IBC is not a solution for SEBs and NHAI, what is?

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Published: February 22, 2020 1:15:24 AM

It remains a travesty that while government-owned banks took Ajit Gulabchand’s Lavasa city project to the insolvency court, the same Gulabchand was owed much more money by the government-owned NHAI which, since it was a statutory body, could not be dragged to the insolvency court.

In the case of NHAI, the government’s balances with RBI too should be dipped into automatically.

It remains a travesty that while government-owned banks took Ajit Gulabchand’s Lavasa city project to the insolvency court, the same Gulabchand was owed much more money by the government-owned NHAI which, since it was a statutory body, could not be dragged to the insolvency court. Not allowing a statutory body to be liquidated or sold off makes sense since, if NHAI is to be sold off, for instance, who will build the roads for the government? Similarly, if the State Electricity Boards (SEBs) that owe around Rs 1 lakh crore to electricity generators in the public and private sectors are to be dragged to the insolvency courts, who will supply electricity to the country? Indeed, there are court judgments on this, arguing that statutory bodies are an ‘instrumentality of state’, and you can’t take the government to court.

That may very well be true, but the government has to come out with a viable solution. After all, if those supplying to the government don’t get their money back, not only does this ruin their business, it can also result in them losing control of it as happened in the case of the Lavasa city project. Also, if the SEBs are to be privatised, as has happened in the case of cities like Delhi, and will happen in other cases too given Union power minister RK Singh’s plans, they are incorporated bodies and, presumably, can be taken to IBC. If a privately-owned distribution company can be taken to IBC, why can’t a government-owned one be taken?

There are, of course, work-arounds, and till such time as there is greater clarity on how the government can be forced to pay on time, we need a solution that works; not something that is dependent on whether the prime minister or the finance minister directs the statutory bodies to make good their dues. In the case of the SEBs, an easy solution is to get the state governments and the SEBs to sign a tripartite agreement that, whenever there is any delay in a payment, allows RBI to dip into the state government’s account with it and pay the money to whom it is due.

In the case of NHAI, too, the government’s balances with RBI too should be dipped into automatically. The government—and bodies owned by it—has, for too long, got away with not paying suppliers on time; even tax refunds are routinely delayed when the government is strapped for cash. If the country is to have good credit discipline, the rules cannot apply to one of the biggest participants.

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