Govt getting light on heavy industries

Of the 64 firms that went to BRPSE, 25 fell under Department of Heavy Industries

The Department of Heavy Industries (DHI) accounted for over a third of sick units in the public sector. Of the 64 companies that went to the Board for Reconstruction of Public Sector Enterprises (BRPSE), 25 (nearly 40 per cent) fell under DHI; all the units that BRPSE has approved to be shut down belong to this sector.

Other departments which had a high number of sick public sector undertakings (PSUs) are department of pharmaceuticals (five units referred to BRPSE) followed by textiles and railways, (four each). Steel, chemicals & petrochemicals and fertilisers departments had three sick PSUs each.

The government's most-valuable and profit-making firms are from the natural resources space, led by listed giants such as ONGC and Coal India

The five companies that are facing closure are HMT Bearings, HMT Watches, HMT Chinar Watches, Tungabhadra Steel Products and Hindustan Cables.

While Heavy Industries Minister Anand Geete did not name the two non-HMT entities that were approved for closure in Tuesday's Question Hour leading to speculation about their names, he had clearly mentioned these names in a press conference in September. These names were also reported in some media reports, quoting a Cabinet note around the same time.

The minister had in September also mentioned the name of Hindustan Photo Films Manufacturing (HPFML) as one of the candidates facing closure. However, HPFML's case was approved the previous financial year itself, according to the annual report of the Department of Public Enterprises for the year 2013-14.

According to the minister, these six companies had an employee strength of 3,603; they are being offered attractive voluntary retirement packages. The Department of Public Enterprises (DPE) website has multiple lists of several entities each. While one list is titled companies 'referable to BRPSE', another has 'proposals received in DPE for reference to BRPSE' and a third with 'companies whose closure/revival plans (are) recommended by BRPSE'.

The first list has 61 companies, the second 68 and the third lists 64. Though many names are overlapping, there is no clear explanation of the difference in numbers. According to footnotes to the third list, BRPSE had recommended revival of 45, closure of four and revival of three by their holding companies.

Some additional information is available in the annual report of the DPE for the year 2013-14.

 

The report also said that of the 64 cases the BRPSE had given recommendation, 45 were for revival through restructuring package, eight for revival through state government takeovers, joint ventures and disinvestment, five for revival through mergers and six for closure. It showed the companies that were cleared for shut down at the end of previous financial year were Bharat Opthalmic Glass, Bharat Yantra Nigam, Biecco Lawrie, STCL and the 'breakfast food' unit of the Hindustan Vegetable Oils Corp. The BRPSE had also cleared the closure of three non-operating units of Cement Corporation of India.

None of these lists mention Air India or MTNL. However, the annual report said: "In addition, the board also reviewed, on suo moto, the performance and outlook of two incipient sick CPSEs namely (i) Mahanagar Telecom Nigam Ltd and (ii) Bharat Sanchar Nigam Ltd."

The annual report shows the government has thrown significant amount of cash and other resources in propping up these sick units.

The government has provided a total assistance worth Rs 32,867 crore to some 49 sick units. Of this, Rs 9,589 is in the form of cash assistance. While cash assistance involves budgetary support through equity/loan/grants, non-cash assistance involves waiver of interest, penal interest, loan from the Centre, guarantee fee, conversion of loan into equity/debentures, etc.

The department uses multiple criteria such as schedules, Ratnas, profitability and listing to classify the PSUs. With several of these criteria overlapping, the benefits and purpose of such multiple classifications are unclear.

The categorisation of CPSE has implications on grant of Ratna status, pay scales of chief executives and full time functional directors of CPSEs, highest level allowed for below board level posts, etc, says the annual report.

As on March 31, 2014, there were 64 Schedule 'A', 69 Schedule 'B', 47 Schedule 'C', and 4 Schedule 'D' CPSEs. The remaining 93 were unscheduled. Separately, there are seven Maharatnas, 17 Navratnas and 72 Miniratnas. The Miniratnas are further sub divided into 54 Category-I and 18 Category-II units.

While some reports have quoted public enterprises survey (PES) of 2013-14, the DPE website is yet to publish it. According to the PES of 2012-13, there were 277 Central Public Sector Enterprises (CPSEs) as on March 31, 2013. Out these 277 CPSEs, 229 were in operation and 48 CPSEs have yet to commence business. Out of 229 operating CPSEs as many as 149 CPSEs showed profit during 2012-13, 79 CPSEs incurred losses during the year and one CPSE has shown no profit/no loss.

The cumulative investment (paid up capital plus long terms loans), which was Rs 29 crore in five enterprises as on March, 1951, has gone up to Rs 8,50,599 crore in 277 CPSEs as on March, 2013. While the increase in 'investment' in all the CPSEs went up by 16.63 per cent in 2012-13 over 2011-12, the increase in 'capital employed' went up by 13.23 per cent during the same period.