Modi says India to look at restructuring state-run firms

By Rajesh Kumar Singh

NEW DELHI (Reuters) - India will consider restructuring its beleaguered state-run firms, in preference to divestments or outright shutdowns, by taking steps to change the work culture of their employees, Prime Minister Narendra Modi said on Friday.

Modi's government is focusing on reforming India's underperforming state-run companies, through measures such as privatisations and stake sales that can also help raise funds.

State firms dominate industries such as banking, oil marketing and coal in a legacy from India's socialist past, but many, often referred to as public sector undertakings or PSUs, are overstaffed and used to hand out jobs and political favours.

"Do we have just two options: divest or shut down? There is also a third way, corporatise (restructure) them. Change their work culture," Modi said in a speech in Hindi, at a media event in the country's capital.

Strikes often paralyse operations at state firms. Millions of workers across India recently stayed off work to protest against Modi's plans to loosen rigid labour laws, in a strike organised by trade unions.

Modi cited Shipping Corporation of India as a state-run company that had been successfully restructured, saying it was now posting profits.

The shipper's net profit had surged 1.6 billion rupees ($23.94 million) in the July-September quarter, from 185.9 million a year ago, it said last month.

Still, the government is widely expected to continue pursuing its ambitious divestment plan, including a stake of 10 percent in Coal India that could raise as much as $3 billion, as it seeks ways to boost spending on infrastructure.

Modi said on Friday work had begun on 60 to 65 stalled infrastructure projects.

The government also needs funds to help it meet an ambitious fiscal deficit target of 3.9 percent of gross domestic product for the year ending in March 2016.

($1=66.8250 rupees)

(Writing by Rafael Nam; Editing by Clarence Fernandez)