Lease of life for sick govt industries

CA Manish K Dhoot (CA, B. Com, NCFM, CPCM) (5015 Points)

24 November 2009  

 THE GOVERNMENT plans to offer six loss-making public sector units on long-term lease to private players for periods up to 99 years, as it looks to bypass the divestment norms that make these firms unattractive for buyers. 



    The companies that may be offered on lease are HMT, Hindustan Fertiliser, Scooters India, Hindustan Cables, Triveni Structurals and NEPA, said a senior government official. The government will appoint consultants soon for valuation of these firms, he said on condition of anonymity. 



    The proposal to lease out lossmaking PSUs, instead of rehabilitating or selling them, will form part of the government’s divestment policy under which it has already firmed up a plan for profit-making firms. Under the existing norms, the government is required to hold at least 51% stake in companies run by it. “Some of these companies are not functional. They have assets like machinery and land bank. We’ve proposed that such firms should be transferred to private players under lease, rehabilitate and operate model,” said an official with Planning Commission, the country’s largest advisory body. 



    Earlier this year, the department of public enterprises had compiled a list of 59 public sector firms and sought opinion of various ministries on their divestment schedule. 



    The government has now asked the administrative ministries of these companies to start the process of appointing consultants, so that the assets of these companies can be valued. 



    “In case of some units, they were given land on lease by respective state governments, issues such as this also needs to be resolved,” said an official with the ministry of heavy industries. 



    According to Ravi Kumar, exchairman of capital goods maker Bhel, the proposal to give sick PSUs on lease may work out and will benefit the private sector players. “We have played a major role in the revival of HEC, Ranchi. Some of these PSUs have great assets in terms of strategic location and land bank, which can be advantageous for bidders,” he said.