(February 23, 2011)

The heavy industries ministry has cleared outright sale of sick state-run companies Scooters India and HMT Bearings in a clear departure from its divestment policy that focused on sale of small stakes in profit-making firms.

If the move gets Union cabinet's approval, the ministry could press for sale of 59 sick companies owned by the central government to pocket around 20,000 crore. This could contribute greatly towards the government's plans to reduce fiscal deficit to 4.8% in the financial year beginning April.

"These two companies have been cleared for outright sale. We are reviewing some other companies as well," said an official with the ministry. Similar proposals for Hindustan Salts and Bharat Pumps and Compressor could be in the offing, he said, requesting anonymity.

The government holds 95% in Scooters India and 97% in HMT Bearings through HMT. The two companies together incurred losses of around 37 crore in the fiscal year ended April last.

"There is no point in running these companies with losses or just selling a minority stake as no private player would be interested," said the official. "Financial restructuring has been elusive and companies have slipped into losses because there is no strategic plan in place," he said.

Heavy industries minister Praful Patel had earlier highlighted the need to look at sick companies such as Scooters India differently. "Some disinvestment, some outright sale," he had said, hinting at a change in the divestment strategy of the government. There are 27 sick companies under the administrative control of the ministry.

The board for reconstruction of public sector enterprises (BRPSE) had suggested that the government should put sick PSUs under the lease, rehabilitate and operate plan. But there are few takers for this model. Private players taking over a debt-ridden company seek full control over management and assets.

The ministry, however, is concerned about private players only interested in real estate assets of these companies. "There is this concern. But we cannot force anyone to run a sick company. In cases where private companies do not have a business plan, the government can look at other measures," he said citing example of the National Textile Corporation.

The BRPSE had identified public enterprises such as ITI , HMT, Hindustan Photofilms and Fertilisers and Chemicals Travancore, where there was surplus land available for disposal. Initial estimates suggest that land bank of these PSUs is around 1,500 acres.

" But this is leased land and not freehold. As per deeds of conveyance, consent of the state government will be required for putting them on the block," said an official with the department of public enterprises, a nodal agency for all state-run companies.

While private players such as Mahindra & Mahindra have expressed interest in Scooters India, the government may find it hard to allay the fears of the employee unions.

Top organising body for all central state-run enterprises, the Standing Committee of Public Enterprises, has already raised questions on the employee retention issue. "We would wish that erstwhile prestigious companies could be revived by way of technology upgradation. We have also expressed concerns for the employees working in these companies," said UD Choubey, director general of SCOPE.

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