Govt thinks of new ways of ridding itself of loss-making PSUs

In a bid to exit state-run companies who are in loss, the government is planning to establish a separate holding company. A senior official aware of the developments informed Economic Times that the move might follow winding up of the Board for Reconstruction of Public Sector Enterprises (BRPSE) set up in 2004 to prepare plans to revive sick state-owned companies.

The official, on condition of anonymity said, "There have been some initial discussions. The government can transfer its shares to the holding company, which in turn will look at possible options of revival or sale of assets. Such a structure could be managed by independent experts from private sector."

The government, however, is planning to raise 28,500 crore through strategic disinvestments out of the Rs 69,500-crore disinvestment target for this financial year.

The ET report also mentioned that the new structure could be on lines of Temasek, the entity to which the Singapore government had transferred its assets to be managed on a commercial basis.

Minister of heavy industries and public enterprise Anant Geete, earlier this year, had pointed towards the suspension of BRPSE. "We are in discussions to create a new entity for sick PSUs," he had said. The heavy industry ministry has already floated a cabinet note for closure of five central public sector enterprises—HMT Bearings, HMT Watches, HMT Chinar Watches, Tungabhadra Steel Products and Hindustan Cables.
The ministry has proposed that the movable assets of the firms could be either auctioned or transferred to the holding or associate central public sector enterprise or government controlled body.

Not just this but the tourism ministry too is looking forward to selling eight loss-making hotels under the India Tourism Development Corporation. Another official, again, requesting anonymity said that a process similar to that was followed to set up a National Investment Fund (NIF) can also be looked at.

Last year, the government had transferred its shares in six companies - HMT, ITI, Scooters India, Andrew Yule & Co., Fertilizer and Chemical (Tranvancore) and Hindustan Photo Films Manufacturing Co—in a special NIF to meet the capital markets regulator Sebi's guidelines of a minimum 10% public holding. State-owned companies need to have at least 25% public shareholding by 2017.

"The government has already relinquished its control over those stakes. A similar structure may work for loss-making companies as well," the official said. The government's new strategy is to revive only those loss-making entities that are operational in a strategic area, have minimum 10 per cent market share or are able to raise loans from banks without a government guarantee.

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