Modi govt’s first strategic sale gets Cabinet nod
Bharat Pumps & Compressors to be privatised, Hindustan Cables to be closed
The Union government formally started strategic sales on Wednesday with the Allahabadbased Bharat Pumps and Compressors (BPCL) getting the Cabinet Committee on Economic Affairs (CCEA)’s inprinciple approval for privatisation. The government has budgeted ~20,500 crore to come from strategic sales this financial year.
In a separate decision, the Cabinet also cleared closure of Hindustan Cables (HCL). For this purpose, it also cleared a ~4,777.05 crore package for paying wages, offering early retirement schemes and converting government loan into equity in the company.
The CCEA also approved a proposal to provide ~111.59 crore as nonPlan loan to BPCL, which manufactures heavy duty pumps and compressors, CNG gas cylinders, cascades to oil refineries, petro-chemicals, chemicals, fertiliser and downstream industries. The loan will help the company pay statutory dues such as provident fund and gratuity of retired employees and the outstanding dues of CISF and, hence, come out of legal complications.
“It will motivate the employees and improve the performance of the company. This will put an end to further legal complications and penal action against the company,” an official statement said. This is the first strategic sale approved by CCEA, after the previous National Democratic Alliance government privatised Jessop & Company some 12 years back. The government had planned to privatise some public sector undertakings (PSUs) in 2015-16 and budgeted ~28,500 under this head. But nothing came of it and the government scaled down projections for this year’s receipts compared to the previous year.
After 35 years of operations, beginning in 1970, BPCL was referred to the Board for Industrial and Financial Reconstruction (BIFR).
Its net loss tax swelled to ~2,791.12 crore in 2012-13 from ~524.26 crore the previous year, according to latest data available. Established in 1952, HCL had four manufacturing units at Rupnarainpur and Narendrapur (West Bengal), Hyderabad (Telangana) and Naini (UP). It was set up to cater to the needs of government-owned telecom companies BSNL and MTNL for manufacture of cables. Because of the rapid change in telecommunication technology (wire-line to wireless), the demand for such cables reduced drastically.
There will be cash infusion of ~1,309.90 crore and non-cash infusion of ~3,467.15 crore in the company. The non-cash portion will be used for conversion into equity of the Centre's outstanding loan (including interest) as on September 30, 2016. Secured creditors of HCL, led by the State Bank of India, had opted for a One Time Settlement (OTS) of dues, which include complete waiver of interest and settlement of principal amount of ~305.63 crore. There has been no production activity in the company since January2003. According to guidelines issued by the Department of Public Enterprises, workers of companies that are being closed down have to be given VRS at 2007 notional pay scale, irrespective of the scale at which they are working. The guidelines, aimed at expediting closure of ailing PSUs, were reissued by the department on Wednesday.
HCL was part of 17 ailing PSUs that were planned to be closed down.